Consequences of worker's remittances on human capital: An in-depth investigation for a case of Pakistan

Purpose: This paper aims to empirically investigate the consequences of worker remittances on human capital formation in case of Pakistan. Methodology: In order to achieve the target of this study; Autoregressive Distributed Lag (ARDL) Bounds Testing Approach is used for the period from 1981-2011. Findings: The findings of this study have exposed that worker's remittances have an adverse impact on human capital formation. The coefficient of worker's remittances is significant at 5 percent level of significance. One important justification for the deteriorating impact of worker's remittances on human capital formation is the negligence of parental care. Particularly, the absence of father or any other close relative from home leads to situations where there can be no checks on the outside home activities of the children. Also, the cultural constraints in the country restrict mothers or any female member of the household to go outside to look after their children's activities. Therefore; the positive impact of worker's remittances in the form of inflow of income is offset by the adverse impact of the negligence of the parental care and hence, human capital is showing adverse performance rather improving. Originality/ Novelty: There is hardly any empirical study which investigates the consequences of worker's remittances on human capital formation in case of Pakistan. This is an attempt which may fill this gap.