Do remittances alleviate poverty and income inequality in poor countries? Empirical evidence from sub-Saharan Africa

Adenutsi, Deodat E. (2011): Do remittances alleviate poverty and income inequality in poor countries? Empirical evidence from sub-Saharan Africa.

Abstract

An attempt has been made in this paper to examine the impact of international remittances on poverty and income inequality in sub-Saharan Africa (SSA). In carrying out the study, 34 SSA countries for which relevant data are available, between 1980 and 2009, were sampled for the poverty analysis whilst a sample size of 36 was used in the remittances-income inequality exploration. A set of dynamic panel-data models was estimated using system Generalized Method of Moments. It was found that remittances have significant poverty-alleviating effect, with the poorest of the poor being the least beneficiaries. Additionally, International remittances have income equalisation effects in countries with relatively narrower income gap, but with an intensifying income-inequality aggravating effects in countries with relatively wider income gap. It is, thus, concluded that although remittances have huge potentials to alleviate poverty and equilibrate incomes in SSA, these remittances have size-effects to the detriment of relatively poorer countries and countries with relatively higher income gap. Therefore, the paper recommends that, although the poverty-alleviating effects and income equalisation effects of remittances cannot be downplayed, it is imprudent for SSA policymakers to overly exclusively on remittances as a poverty-reduction strategy towards sustainable socioeconomic development of the sub-region.

• Item Type: MPRA Paper
• Language: English
• Keywords: Remittances; Poverty; Inequality; Developing Countries; system GMM; Sub-Saharan Africa
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration; N - Economic History > N3 - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy > N37 - Africa ; Oceania; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; F - International Economics > F2 - International Factor Movements and International Business > F24 - Remittances

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