International Labour Migration, Remittances and Income Inequality in a Developing Country: The Case of Sri Lanka

Abstract

International labour migration and migrants’ remittances have been tremendously increasing and diversifying during the past few decades. The reported number of Sri Lankan international migrants increased to 1.5 million persons or one out of every 19 persons in Sri Lanka by 2006. As a result, reported migrant workers remittances to Sri Lanka increased at an average annual rate of 10 percent over the past 30 year. Since the mid-1990s they constitute the largest source of foreign financing method. Meanwhile Sri Lanka has been experiencing growing income inequality trend since late 1970s. By using available macro-level and micro-level data, this paper attempted to explore relationships among international labour migration, remittances and income inequality in Sri Lanka. This paper argues that, under the present circumstances, increasing number of international migrants from Sri Lanka or increasing remittances to Sri Lanka generate higher income inequality in the country. Thus, policy makers should pay attention for these phenomena and attempts must be made to develop linkages between relatively developed regions and backward regions in the field of education, skill development, information availability, and utilization of remittances of return migrants in Sri Lanka.