Impact of remittances on poverty at origin: a study on rural households in India using Covariate Balancing Propensity Score Matching

Abstract

In India, migration research has chiefly concentrated upon determining the causes rather than the effects of migration. A review of the extant literature reveals a near absence of studies exploring the linkages between remittances and poverty in India. This paper attempts to partly fill that void by assessing the effect of remittances on rural development. The National Sample Survey Office (NSSO), which carried out a nationwide survey on migration in 2007–2008, reported that out-migrants from rural India have a much higher propensity to remit compared to their urban counterparts. As rural poverty in India continues to pose the most fundamental development challenge, this paper explores on the basis of unit level data obtained from the NSSO survey whether transfer income in the form of remittances help to alleviate/de-intensify poverty among recipient rural households. Using the nascent technique of covariate balancing propensity score, rural households receiving remittances are matched with households that have similar background characteristics but do not receive remittances, and the impact of remittance income on their poverty status is subsequently ascertained. After correcting for self-selection, the study finds that remittance income from both internal as well as international sources do serve to lower the incidence of poverty among rural households although, expectedly, international remittances seem to have a stronger poverty alleviating effect.