International Remittances and Poverty: Blessing or Curse?
International Remittances and Poverty: Blessing or Curse?

Summary/Abstract: This paper aims to examine the effectiveness of international remittances on poverty. The equation explaining the determinants of poverty is analyzed using the fixed-effects regression model, and the equation examining the existence of a two-way relationship between poverty and international remittances is analyzed using the three-stage least squares model. The empirical findings reveal that there is a bi-directional relationship between poverty and international remittances. An increase in poverty levels triggers migration abroad, and remittances sent by immigrants to their country of origin reduce poverty. An increase in government spending and household income reduces poverty, while an increase in income inequality and inflation exacerbates poverty. Moreover, trade openness has a positive effect on international remittances, and official remittances become easier in financially developed economies as transaction costs decrease. By channeling international remittances, which are considered a stable source of finance, into the accumulation of physical and human capital, they contribute to economic development and increase their impact on poverty. This study contributes to the literature by using the most recent and comprehensive dataset and econometric methodology, and by differentiating the impact of international remittances on poverty by income group-specific effects as well as by region-specific effects.

• Details
• Contents