Impact of migration costs, microcredit, and remittances on cross-border labour migration decisions: Evidence from a Cambodian household survey
Permanent link to Research Commons versionhttps://hdl.handle.net/10289/15653
Over the past two decades, the migration of Cambodian workers has contributed to poverty reduction and economic development. However, it has also constituted a substantial challenge, in view of the significant increase in the exodus of Cambodian migrant workers, particularly the migration to Thailand. This challenge has highlighted the need for a better understanding of the process, as well as of the interconnectedness and complementarity of migration and policies. Given the prominence of the topic, this thesis provides an examination of the Cambodian labour migration process. There are four key research papers in this thesis. Using survey data from 422 households in three northern provinces of Cambodia, the thesis begins with an attempt to evaluate and quantify the monetary costs of migration and evaluate the impact of worker-paid migration costs on decision whether to migrate through legal and illegal channels. In the first core paper, migration cost is a critical factor in international labour mobility, but little is known about the pay of migrant workers in foreign jobs. Previous studies do not capture the effects of direct worker-paid migration costs on migration decisions. An alternative specific conditional logit model is used in this chapter to account for alternative migration costs, and the control function method is used to control for endogenous moving costs. Our results show that lowering the total cost of labour migration reduces irregular migration by 15.8 percentage points. Factors such as Thailand’s immigration policy, as measured by the deportation rate, migrant length of stay, and wages, also influence whether migration is regular or irregular. These findings should prompt policymakers to consider alternative approaches to reducing migration costs and maximising the net gain on migration. The second paper, constituting Chapter 3 in this thesis, investigates the microcredit-migration linkage through the lens of South–South Migration (SSM). Evidence from the literature evaluating the linkage between microcredit and migration is ambiguous. This chapter analyses the effect of microcredit on labour migration decisions in the context of South-South Migration (SSM) through the Cambodia to Thailand migration corridor. The study uses the endogenous switching probit model (ESP) to control for endogenous selection bias in borrowing and for the structural differences between decisions to borrow or not to borrow that influence the resolve to migrate. The findings suggest that households with access to credit are more likely to have migrant family members than their non-borrowing counterparts. It is evident that households that have borrowed from financial institutions are 5.6 percentage points more likely to migrate, whereas households that borrow informally show a 3.2 percentage points likelihood of migrating. The findings of this study are important for policymakers to reassess policies on credit availability and redesign microfinance programmes to maximise gains from labour migration. An investigation of the impact of remittances on household debt performance and levels of indebtedness is carried out in the third empirical paper, presented in Chapter 4 of the thesis. The findings suggest that households view remittances as transitory income, which declines as a migrant’s length of stay away from home increases. Because remittance transfers are transitory, the results suggest that they have a positive impact on household debt performance, particularly in low-debt households. Thus, remittances can lower the debt of recipient households. Given the importance of remittances in households' debt reduction, policies promoting remittance transferring options and fee deduction should be endorsed in order to maximise remittances received by recipient households. The final paper is elaborated in Chapter 5 of the thesis. This chapter examines two intertwined policy issues in the Cambodia-Thailand migration corridor during the COVID-19 period, focusing on labour recruitment practices and debt-related migration. This paper first identifies existing labour migration issues and policy gaps prior to the pandemic, then argues that these pre-existing challenges caused a delayed response, negatively affecting labour migration. Current labour migration during COVID-19 is heavily influenced by the motivations of private recruitment agencies (PRAs) engaged in this lucrative business, by high migration costs, and debt-induced and debt-financed migration. In the aftermath of the pandemic, the study recommends that key stakeholders discuss how to regulate labour mobility. With the evidence of Cambodia-Thailand labour mobility, policymakers can enhance policy designs and interventions to mitigate the effect of COVID-19 and manage future migration crises.
The University of Waikato
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