Exploring the role of external and internal remittances in household development

The present study investigates the effect of external and internal remittances on the household-based human development index (HHDI). The study uses Pakistan Social and Living Standard Measurement & Household Integrated Economic Survey (PSLM - HIES) to estimate and compare the HHDI and its sub-indices, namely education, health, and living standard, among households categorised as external-, internal-, and non-remittance-receiving. The study implies the Ordinary Least Squares (OLS) model and the Instrumental Variable (IV) technique for empirical investigation. The regression model results suggest that external-remittance-receiving households encounter a higher level of development than other household categories. Internal-remittance-receiving household is relatively vulnerable, as they exhibit lower levels of development than non-receiving households. It implies that external remittance-receiving households show a large and significant advantage, underscoring the developmental gains associated with international migration. By contrast, internal remittance households record a negative and significant effect, placing them at a clear disadvantage even relative to non-receiving households. Unlike external remittances, which drive transformative improvements, internal remittances mostly help households survive rather than progress. The aftermaths of the Instrumental Variable Technique suggest that the differential effect of external and internal remittances is positively associated with outcomes of household development. The findings of the study propose potential policy measures to elevate the household development.