Migration and economic development

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This study estimates the savings and investment functions of Pakistani migrants employed abroad, focusing on the impact of remittances on capital formation and the potential for these earnings to fund productive investments that create jobs in Pakistan. Evidence from a two-year empirical research project in key migration areas indicates that remittances are a significant source of investment financing, especially in agriculture, contrary to common beliefs. The acquisition of skills positively influences the investment activities of migrant households, although the proportion of migrants gaining additional skills while abroad is relatively low. Migrants who worked in countries outside the Middle East tend to invest more than those in oil-exporting nations. However, many of the investments made by migrants yield low profitability in terms of return on investment. The author suggests that establishing "workers’ companies," inspired by models from Turkey, could offer a more profitable investment avenue for migrants. Additionally, enhancing the rural financial system is deemed essential for boosting the average savings rate of the rural population through financial innovations.