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International Remittances and Income Inequality: An Empirical Investigation

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  • Valerie Koechlin
  • Gianmarco Leon

Abstract

Using several cross-sectional and panel data methodologies, this paper provides evidence of the existence of an inverted U-shaped relationship between international remittances and income inequality in a cross section of 78 countries. Our analysis supports previous theoretical work that describes how, at the first stages of migration history, there is an inequality-increasing effect of remittances on income inequality. Then, as the opportunity cost of migrating decreases due to this effect, remittances tend to lower inequality. We also show how education and the development of the financial sector can help countries reach faster the inequality-decreasing section of the curve.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/17487870701346514
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

Volume (Year): 10 (2007)
Issue (Month): 2 ()
Pages: 123-141

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Handle: RePEc:taf:jpolrf:v:10:y:2007:i:2:p:123-141

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Related research

Keywords: Migration; international remittances; income distribution; GMM-IV;

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References

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  9. Alberto Chong & Gianmarco León, 2006. "Barriers to Exit," Research Department Publications 4476, Inter-American Development Bank, Research Department.
  10. Gabriel Gonzalez-Konig & Quentin Wodon, 2005. "Remittances and Inequality," Department of Economics and Finance Working Papers EC200506, Universidad de Guanajuato, Department of Economics and Finance.
  11. Carrington, William J & Detragiache, Enrica & Vishwanath, Tara, 1996. "Migration with Endogenous Moving Costs," American Economic Review, American Economic Association, vol. 86(4), pages 909-30, September.
  12. Taylor, J. Edward, 1992. "Remittances and inequality reconsidered: Direct, indirect, and intertemporal effects," Journal of Policy Modeling, Elsevier, vol. 14(2), pages 187-208, April.
  13. Alberto Chong, 2001. "Inequality, Democracy, and Persistence: Is There a Political Kuznets Curve?," Research Department Publications 4253, Inter-American Development Bank, Research Department.
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  15. Yves Bourdet & Hans Falck, 2006. "Emigrants' remittances and Dutch Disease in Cape Verde," International Economic Journal, Taylor & Francis Journals, vol. 20(3), pages 267-284.
  16. Papanek, Gustav F. & Kyn, Oldrich, 1986. "The effect on income distribution of development, the growth rate and economic strategy," Journal of Development Economics, Elsevier, vol. 23(1), pages 55-65, September.
  17. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers 73, China Economics and Management Academy, Central University of Finance and Economics.
  18. Ahluwalia, Montek S., 1976. "Inequality, poverty and development," Journal of Development Economics, Elsevier, vol. 3(4), pages 307-342, December.
  19. Stark, Oded & Taylor, J Edward & Yitzhaki, Shlomo, 1986. "Remittances and Inequality," Economic Journal, Royal Economic Society, vol. 96(383), pages 722-40, September.
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  23. Adams, Richard H, Jr, 1989. "Worker Remittances and Inequality in Rural Egypt," Economic Development and Cultural Change, University of Chicago Press, vol. 38(1), pages 45-71, October.
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Citations

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Cited by:
  1. Sanjeev Gupta & Catherine A. Pattillo & Smita Wagh, 2007. "Impact of Remittanceson Poverty and Financial Development in Sub-Saharan Africa," IMF Working Papers 07/38, International Monetary Fund.
  2. Christian Ebeke, 2011. "Transferts des migrants, ouverture sur l'extérieur et dépenses publiques dans les pays en développement," Working Papers halshs-00552983, HAL.
  3. Filiz Garip, 2012. "Repeat Migration and Remittances as Mechanisms for Wealth Inequality in 119 Communities From the Mexican Migration Project Data," Demography, Springer, vol. 49(4), pages 1335-1360, November.
  4. Rafael Domínguez Martín, 2009. "Migraciones, Desigualdad y Desarrollo en los Estados de México," Documentos de trabajo sobre cooperación y desarrollo 200902, Cátedra de Cooperación Internacional y con Iberoamérica (COIBA), Universidad de Cantabria.
  5. Gupta, Sanjeev & Pattillo, Catherine A. & Wagh, Smita, 2009. "Effect of Remittances on Poverty and Financial Development in Sub-Saharan Africa," World Development, Elsevier, vol. 37(1), pages 104-115, January.
  6. Simeon Karafolas & Nikolaos Sariannidis, 2009. "The Banking Network as a Transmission Channel of Migrant Remittances: The Case of Greek and Italian Banks in Albania," Transition Studies Review, Springer, vol. 15(4), pages 674-684, February.
  7. Christian EBEKE, 2009. "The power of Remittances on the Prevalence of Child Labor," Working Papers 200924, CERDI.
  8. Shahbaz, Muhammad & Ur Rehman, Ijaz & Ahmad Mahdzan, Nurul Shahnaz, 2013. "Linkages between Income Inequality, International Remittances and Economic Growth in Pakistan," MPRA Paper 45577, University Library of Munich, Germany, revised 20 Mar 2013.
  9. Alassane Drabo & Christian Ebeke, 2011. "Remittances, Public Health Spending and Foreign Aid in the Access to Health Care Services in Developing Countries," Working Papers halshs-00552996, HAL.
  10. Simeon Karafolas & George Konteos, 2010. "Choice of Money Transfer Methods in the Case of Albanian Immigrants in Greece," Transition Studies Review, Springer, vol. 16(4), pages 962-978, February.
  11. Ratha, Dilip & Mohapatra, Sanket & Scheja, Elina, 2011. "Impact of migration on economic and social development : a review of evidence and emerging issues," Policy Research Working Paper Series 5558, The World Bank.
  12. repec:hal:journl:halshs-00587797 is not listed on IDEAS
  13. Mazhar MUGHAL & Amar Iqbal ANWAR, 2012. "Remittances, Inequality and Poverty in Pakistan: Macro and Microeconomic Evidence," Working Papers 2012-2013_2, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2012.
  14. Ambrosius, Christian, 2011. "Are Remittances a 'Catalyst' for Financial Access? Evidence from Mexico," Proceedings of the German Development Economics Conference, Berlin 2011 5, Verein für Socialpolitik, Research Committee Development Economics.
  15. TCHAMANBÉ DJINÉ Louise, TDL & MIAMO WENDJI Clovis, MWC, 2012. "Transferts Financiers des Migrants et développement en Afrique subsaharienne," MPRA Paper 38139, University Library of Munich, Germany.
  16. Garcia-Fuentes, Pablo A. & Kennedy, P. Lynn, 2009. "Remittances and economic growth in Latin America and the Caribbean: The Impact of the human capital development," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46751, Southern Agricultural Economics Association.

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