Abstract

This study re-examines a stylised fact: that money sent home by migrants (remittances) helps families start businesses. Using seven years of data from the World Bank’s Listening to the Citizens of Uzbekistan survey—covering more than half a million person–round observations—we examine whether receiving remittances actually increases the likelihood of owning a business or being self-employed.

Our preferred propensity score matching (PSM) estimates suggest a significant negative relationship between remittances and entrepreneurship in the short term. This negative effect is immediate and persists, albeit more weakly, at one- and two-year lags. We test this finding in many different ways, using various definitions of remittances and different groups of households (both with and without migrants), as well as considering return migration. The overall conclusion does not change significantly. However, our econometric models suggest that the likelihood of engaging in entrepreneurship depends on the legality of migration and the destination country.

These results are important for countries such as Uzbekistan, where many families depend on money earned abroad. Remittances seem to be used mainly to cover daily expenses rather than to start new businesses. In order to stimulate local economic growth, policymakers may need to introduce special programmes, such as grants for business plans, improved access to finance, diversification of migration corridors with a focus on more developed countries, and more secure legal pathways for migrants working overseas.