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Analysis of Impact of Remittance on Poverty in Nigeria

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  • Nnaemeka Chukwuone
  • Ebele Amaechina
  • Sunday Emeka Enebeli-Uzor
  • Evelyn Iyoko
  • Benjamin Okpukpara
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    Abstract

    This study analyzes the impact of remittances on poverty in Nigeria, using data from the 2004 Nigerian National Living Standard Survey (NNLSS). The paper used a multinomial logit model with instrumental variables and the propensity score matching (PSM) method to estimate the impact of remittances on poverty. The use of these methods was based on two reasons. The first is to control for the problems of selectivity and endogeneity. The second is the fact that the implicit hypothesis of estimating the expenditures of the counterfactual group, as done in some previous studies, is in similarity between the group that receives remittances (treated) and the other that does not (untreated). The study finds that both internal and international remittances reduce the incidence, depth and severity of poverty. The statistical tests show a significant Average Treatment Effect on the Treated (ATT), due to internal and external remittances. The receipt of internal remittances reduces the poverty headcount by 11.14% and poverty gap by 9.7% while the receipt of international remittances makes poverty indices almost nil.

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    Bibliographic Info

    Paper provided by PEP-PMMA in its series Working Papers PMMA with number 2012-09.

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    Date of creation: 2012
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    Handle: RePEc:lvl:pmmacr:2012-09

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    Keywords: Remittances; Poverty; Instrumental Variable; Propensity Score Matching; Nigeria;

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    1. Jalan, Jyotsna & Ravallion, Martin, 2003. "Does piped water reduce diarrhea for children in rural India?," Journal of Econometrics, Elsevier, vol. 112(1), pages 153-173, January.
    2. Taylor, J. Edward & Mora, Jorge & Adams, Richard H., Jr. & Lopez-Feldman, Alejandro, 2005. "Remittances, Inequality and Poverty: Evidence from Rural Mexico," Working Papers 60287, University of California, Davis, Department of Agricultural and Resource Economics.
    3. Alan J. Auerbach & Kevin A. Hassett, 2002. "A New Measure of Horizontal Equity," American Economic Review, American Economic Association, vol. 92(4), pages 1116-1125, September.
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    8. Abdelkrim Araar, 2006. "On the Decomposition of the Gini Coefficient: an Exact Approach, with an Illustration Using Cameroonian Data," Cahiers de recherche 0602, CIRPEE.
    9. Douglas Miller & Anna Paulson, 2000. "Informal Insurance and Moral Hazard: Gambling and Remittances in Thailand," Econometric Society World Congress 2000 Contributed Papers 1463, Econometric Society.
    10. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    11. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-12, March.
    12. John Page & Sonia Plaza, 2006. "Migration Remittances and Development: A Review of Global Evidence," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 245-336, December.
    13. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 549-599, May.
    14. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
    15. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
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