Emigration and the distribution of income per natural: Evidence from Egypt

We study the impact of emigration on income distribution of Egyptian households, using longitudinal data covering 1998–2012. Controlling for selection of migrants and work participation of non-migrants, we find that remittances tend to increase income inequality at origin. However taking into account income earned abroad by migrants, adjusted for PPP differences, yields larger gains from migration and a negative impact on inequality of ‘income per natural’. We study the dependence of this effect with the saving share of migrants’ earnings. Positive selection of migrants tends to make migration inequality-increasing, while low transferability of skills in destination countries, primarily in the Gulf region, has the opposite effect. We argue that a focus on remittances is too restrictive to account for the whole benefits of migration to origin households, when transfer costs are high. We confirm this with household panel regressions showing that migration episodes have a significant and large impact in the medium-term on household permanent income, controlling for pre-departure characteristics. The medium-term benefits from migration have an inequality-reducing effect in particular in rural areas.