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Remittances and Poverty: Panel Evidence from High Remittance Economies

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  • Hassan, Gazi

Abstract

The growth effects of remittances are controversial, but their welfare effects are less so. This paper provides evidence on the effect of remittances on poverty in an unbalanced panel of 40 high remittances economies. The endogeneity issue, driven by the possibility that remittances and poverty may have bidirectional causality, is tackled by a system estimation technique using the seemingly unrelated regression estimator (SURE) that not only allows both to be jointly determined but also allows the error terms of the simultaneous equations to be contemporaneously correlated. Using bootstraps, heteroskedasticty robust standard errors of the SURE regressions are reported and the estimates show that remittances significantly reduce poverty. On the other hand, remittances decline with the wake of widespread poverty. There is consistent evidence that remittances also decline with increases in health index of the general population. However, improvements in the health outcomes of poor people are associated with more remittances. Finally, there is some limited evidence that remittances rise with increases in educational attainments of the general population, but fall as the poor people become more educated.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26445.

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Date of creation: 31 Oct 2010
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Handle: RePEc:pra:mprapa:26445

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Keywords: Remittances; Poverty; Panel Data; Seemingly Unrelated Regression (SURE).;

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