Theoretical Homework

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THEORETICAL FRAMEWORK AND RESEARCH METHODOLOGY
In this chapter, the theoretical framework for the study and its methodology are presented here. Basically, it contains the model specification, model estimation techniques and sources and nature of data. The sample periods of the study span from 1980 to 2013. It is a period of 34 years.
3.1 THEORETICAL FRAMEWORK
Remittances are income transfers likely to affect wages and employment both at the household and macroeconomics levels. If leisure is considered a normal good, remittances will create a pure income effect that would reduce labor supply among recipient households. Thus, this reduced labor supply would partially offsets the positive income impact of remittances while the increase in income
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The income distribution changes, if there is a selection for which households receive remittances or if remittances alter the wage distribution. For instance, if remittances are primarily received by households at the middle level of the income distribution. Attendant reductions in labor supply for these households would first raise wages for similar workers; relative wages at the bottom and top ends of the skill distribution could rise or fall, depending on the degree of substitutability of workers of different skill levels. If remittances help recipients invest in businesses, as might be the case in the presence of credit constraints, there might be further distributional effects vis-à-vis wages. In addition, for a flexible exchange rate regime, remittances boost the exchange rate and reallocate activity away from the tradable sector into non-tradables as home country exports become less competitive. Workers in the non-tradable sector thus may benefit at the expense of workers in the tradable sector. Consequently, the net impact of remittances on the income and wage distributions is theoretically …show more content…
Test for stationarity of data is very important in time series data because of spurious regression. Augmented Dickey – Fuller (ADF) unit roots test will be calculated for individual series to produce evidence as to whether variables are integrated. Thus, Augmented Dickey Fuller (ADF) test is employed in this study.
II. CO-INTEGRATION TEST AND ERROR CORRECTION MODEL (ECM).
The next test to conduct will be a co – integration test. This is done when it is established that the series are integrated of order 1(1). A number of methods for testing co-integration have been proposed in the literature. However, Johansen co – integration test is being used in this study. The objective of this test is to establish if there is a long run relationship between Real Gross Domestic Product, Migrant Remittances to Nigeria, Total Labour Force, Foreign Direct Investment in Nigeria and Unemployment Rate in Nigeria.

3.2.3 DATA REQUIREMENTS AND SOURCES
The data needed for this study is time series in nature and it is between 1980 and 2013. It is historical in nature and is in accordance with the objective of the study. The data used are basically secondary, given the limitations faced by the researcher and have been carefully selected from the CBN statistical bulletin and the National Bureau of

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