increased migration and remittances in the local economy could boost the demand for local goods and services, further increasing employment and wages for all.

Furthermore, large out-migration also means large social networks of migrants in destination countries that might find jobs abroad, or provide relevant information on jobs abroad. This could create an incentive for the non-migrants, especially male, to invest in finding out more about the labor markets abroad and make related investments, which could come at a cost of labor supplied in the domestic market. This impact is likely to be stronger for members with a migrant in the household as they have better access to the migrant network abroad, as well as have the resources to make related investments and finance migration.

The net impact of migration depends upon the relative contribution of these channels in the local labor markets. Various channels are likely to have stronger impacts in different segments of the population.

# **4.3.2 Results**

To examine the impact of village level migration rate on wages, I estimate Equation (1) on NLSS-III data, and to estimate the impact on labor supply, I estimate Equation (2) on the census data.<sup>14</sup> A one-percentage point increase in the village level migration rate increases wages by 2.3 percent (Table 5). Between 2001 and 2011, migration rates to Gulf-Malaysia increased by 3.5 percentage points which increased the wages by 8 percent. This overall effect is driven by increases in wages in the agricultural sector, and for women. The change in average level of migration between 2001 and 2011 increased agricultural wages by 14 percent. For females, the change in migration rates between 2001 and 2011 increased average wages by 14 percent, agricultural wages by 15 percent, and casual wages by 12 percent. The effects are qualitatively similar in both rural in urban areas, with the effect on non-agricultural wages higher in rural areas and the effect on casual wages higher in urban areas (Appendix Tables B.1 and B.2). This suggests that even in agriculture, where male and female labor inputs are traditionally considered as being complementary to each other, reduction in male labor supply actually increases female wages. In light of the model described in Appendix A, this would mean that the elasticity of substitution between male and female labor is sufficiently high.

The impact on labor force participation (extensive margin) echoes and complements the results on wages. A one-percentage point increase in village level migration rates increases overall LFP by 0.4 percentage points for individuals from non-migrant households (Table 6). The impact for households with a migrant is lower at 0.2 percentage points. This means that the increase in migration rates between 2001 and 2011, increased LFP by 1.2 percentage points for individuals in non-migrant households, and by 0.7 percentage points for individuals in migrant households. Though these effects are small in magnitude (around 1-2 percent of the LFP rates in 2011), they

> 14Census data does not have information on wages or labor earnings, and hence cannot be used to look at the impact on wages. The NLSS-III data has only about 15 households surveyed per village, and does not provide enough sample to examine the aggregated impact, separated by whether households have a migrant or not.

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