Remittances and Consumption of Public Services: Empirical Evidence from Pakistan | Neelgoon Safdar

Remittances are now one of the largest forms of foreign direct investment, providing a stable form of private aid to households in developing countries. While much of academia has focused on the positive impact of remittances in the area of development, less attention has been given to the political economy implications of such unearned foreign income. Studies discussing the negative impact of remittances on government behavior have assumed that remittances encourage a sectorial glide towards greater use of private substitutes to public services (e.g. private schools versus public schools). This implies that an increase in remittances should be correlated with a decrease in usage of public services. Using cross-sectional household survey data from 2004-2005 and 2010-2011, this research study shows that remittances do not have a significant economic impact on the usage of public versus private schools and hospitals in Pakistan.

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