Island idleness: Investigating the impact of remittances on labour market participation in Comoros

Abstract

AbstractThe labour market is fundamental for economic growth, which makes an in‐depth understanding of its dynamics crucial for development and poverty reduction. One determinant of labour market outcomes are remittances. Remittances can influence the decision of an individual whether to participate in the labour market or not, which makes it necessary to understand this relation. In this study we assessed the impact of remittances on the labour supply in the Comoros, the second largest recipient of remittances as a percentage of Gross Domestic Product (GDP) in Africa, by using propensity score matching and national household surveys for 2014 and 2020 to estimate how remittances influenced the decision to participate in the labour market. Most of our results are statistically insignificant; that is, individuals receiving remittances were as likely to participate in the labour market as non‐receivers. Remittances did not influence the unemployment rate and the number of hours worked. On the other side, we found that the type of work was influenced overall by remittances with remittances receivers being more likely to engage in informal work, being more likely to be self‐employed and finally being less likely to engage in wage work. We further find some heterogeneity across the origin and the amount of received remittances. Foreign remittances can explain better the few significant results than domestic remittances and high remittances receivers influenced the labour participation rate, while low and medium remittances receivers explain better the impact of remittances on hours worked, self‐employment and wage work.