Remittances, Income Distribution, and Rural Asset Accumulation

This paper examines the direct, first-rounds impact of internal and external remittances on income distribution and asset accumulation in rural Pakistan. Using income decomposition techniques on a three year panel household data set, the paper finds that:

• Internal remittances have a positive effect on equity;
• External remittances have a negative effect.

The study also uses an asset-accumulation model to pinpoint the effect of remittances on five types of rural assets: irrigated land owned, rainfed land owned, livestock assets, agricultural capital, and nonfarm assets. The results show that:

• Remittances do have an effect on rural asset accumulation;
• External remittances have a positive and significant effect on the accumulation of land;
• Internal remittances have a positive and significant effect on the accumulation of agricultural capital.