Migration, investments and financial services

The idea that migration and remittances can encourage household investments in business and other productive activities has been widely discussed in the literature. Migration and remittances can offer a way to overcome credit market imperfections and enable households to invest in business start-ups or in land and housing, for example. The evidence for such a link is mixed, however, making it hard to draw any firm conclusions. Research in Mexico, for example, found both positive and significant impacts of remittances on business investments (Massey and Parrado, 1998; Woodruff and Zenteno, 2007) and limited links between migration and productive investment (Basok, 2000; Zarate-Hoyos, 2004). To date there is very limited evidence of the impacts of migration and remittances on investments in Cambodia.

Emigration, return migration and remittances have limited effects on productive investments

The IPPMD data contain detailed information about household business ownership in the non-agriculture sector. About 26% of the households in the overall sample own at least one business (Figure 4.6), but households not receiving remittances are more likely to than remittance-receiving households (30% versus 20%). The share of households owning non-agricultural land is less than 10% for both types of household (9% versus 7%). The share of households owning housing is less than 1% for both household types. Due to this low share, land and housing are analysed together in the regression analysis (referred to as real estate assets).

Figure 4.6. Households receiving remittances are less likely to own businesses and real estate

Share of business and real estate ownership (%) by whether household receives remittances

Note: Results that are statistically significant (calculated using a chi-squared test) are indicated as follows: ***: 99%, **: 95%, *: 90%.

Source: Authors’ own work based on IPPMD data.

Sta.tLink^^2 http://dK.doi.org/10.1787/888933470338

The relationship between migration, remittances and productive assets was analysed using regression analyses (Box 4.4).7 The results show no statistically significant correlation between migration, remittances and having a business or owning real estate. Although migrant and remittance-receiving households have a lower probability of running a business, the link is not statistically significant.

These findings are likely explained by the fact that the decision to migrate in Cambodia is largely influenced by poverty, lack of employment, lack of alternative sources of income, landlessness, and inability to repay debt. This also implies that the amount of remittances that migrants are able to send is generally low and mainly used for securing daily consumption and other basic needs, rather than to fund investments. Accumulation of debts with high interest rates was mentioned as a push factor for emigration in the qualitative stakeholder interviews, and a majority of the emigrants (55%) in the sample stated that loans were the main means of funding their migration. Repaying loans and debts was also the most common activity undertaken by remittancereceiving households (Chapter 3, Figure 3.8).

Return migration also has the potential to affect investment. Migrants may return with new knowledge and capital as a resource to launch business activities or to invest in productive assets (Labrianidis and Hatziprokopiou, 2006; Mesnard, 2004; McCormick and Wahba, 2001). On the other hand, the fact that the return migrant spend time abroad may also have a disruptive effect on labour market integration if the migration experience involves employment below the migrant's qualifications and if social ties in the country of origin are weakened. Creating a business can sometimes then be the “last resort” for return migrants who cannot find a job locally (Mezger Kveder and Flahaux, 2013).

The regression results in Table 4.5 show that return migration is negatively associated with the likelihood of households having a business. Having a return migrant is also not associated with a higher probability of owning real estate, but is negatively associated with business ownership. Hence, the hypothesis that migrants return to the country of origin with capital to invest in productive activities does not seem to hold in Cambodia's case. The profile of return migrants suggests that as the majority have a low level of education (Chapter 3) and take agriculture or other elementary jobs in the country of destination, they do not accumulate enough savings for remitting or investing on their return.

Box 4.4. The links between migration, remittances and business ownership

To analyse the link between migration and business and real estate ownership, two probit model regression were run with the following forms:

where investmenthh is either business ownership or real estate ownership (depending on the specification) undertaken by the household; investmenthh takes on a value of “1” if a household owns at least one business or real estate and “0” if not; remithh in equation (8) represents a binary remittance variable with value “1” for households that receive remittances and “0” otherwise emighh represents a binary variable for whether the household has a migrant or not; controlshh are a set of observed household and individual characteristics that are believed to influence the outcome; and е; is a randomly distributed error term indicating, in part, the unobservable factors affecting the outcome variable.3 In equation (9) returnhh is a binary variable taking on the value

Box 4.4. The links between migration, remittances and business ownership (cont.)

of “1” if the household has at least one return migrant, and “0” for households without return migrants. Sr represents regional fixed effects and shh is the randomly distributed error term.

Four different specifications were carried out (Table 4.5). Specification (1) investigates the link between migration/receiving remittances and household business ownership, controlling for household characteristics, and column (3) analyses the link between migration/receiving remittances and real estate (land and housing) ownership. Specifications (2) and (4) investigate the link between return migration and business ownership and real estate respectively.

Table 4.5. Return migration is negatively correlated with business ownership

Dependent variable: Household runs a business/owns real estate

Main variables of interest: Amount of remittances, having an emigrant/return migrant

Type of model: Probit

Sample: All households

Dependent variable

Variables of interest






Real estate


Real estate

Household receives remittances

  • -0.037
  • (0.036)


  • -0.019
  • (0.023)


Household has at least one emigrant

  • -0.023
  • (0.046)


  • 0.012
  • (0.023)


Household has a return migrant


  • -0.047*
  • (0.027)


  • 0.010
  • (0.019)

Number of observations

1 940

1 940


1 940

Note: Statistical significance is indicated as follows: ***: 99%, **: 95%, *: 90%.

a. The set of household and individual explanatory variables included in the model are the following: household size and household size squared, household dependency ratio (defined as the number of children and elderly in the household as a share of the total adult population), mean education level of the members in the household, number of children in the household, binary variables for urban location and household head being female, and finally an asset index (based on principal component analysis) that aims to capture the wealth of the household.

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