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The impact of remittances on poverty and inequality in Ghana

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  • Adams, Richard H., Jr.
  • Cuecuecha, Alfredo
  • Page, John

Abstract

This paper uses a new, 2005/06 nationally-representative household survey to analyze the impact of internal remittances (from Ghana) and international remittances (from African and other countries) on poverty and inequality in Ghana. To control for selection and endogeneity, it uses a two-stage multinomial logit model with instrumental variables focusing on variations in migration networks and remittances among various ethno-religious groups in Ghana. The paper finds that both internal and international remittances reduce the level, depth, and severity of poverty in Ghana. However, the size of the poverty reduction depends on the type of remittances received. In general, poverty in Ghana is reduced more by international than internal remittances. For households receiving international remittances, the level of poverty falls by 88.1 percent with the inclusion of remittances; for households receiving internal remittances, poverty falls by 69.4 percent with the inclusion of remittances. The paper also finds that both types of remittances increase income inequality in Ghana. For households with internal remittances, the inclusion of remittances causes the Gini coefficient to rise by 4 percent, and for households with international remittances, the inclusion of remittances causes the Gini to increase by 17.4 percent.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4732.

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Date of creation: 01 Sep 2008
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Handle: RePEc:wbk:wbrwps:4732

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Related research

Keywords: Population Policies; Access to Finance; Remittances; Debt Markets; Rural Poverty Reduction;

References

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  1. Michael Lokshin & Mikhail Bontch-Osmolovski & Elena Glinskaya, 2010. "Work-Related Migration and Poverty Reduction in Nepal," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 14(2), pages 323-332, 05.
  2. Lipton, Michael, 1980. "Migration from rural areas of poor countries: The impact on rural productivity and income distribution," World Development, Elsevier, Elsevier, vol. 8(1), pages 1-24, January.
  3. Gustafsson, Bjorn & Makonnen, Negatu, 1993. "Poverty and Remittances in Lesotho," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 2(1), pages 49-73, May.
  4. Taylor, J. Edward & Mora, Jorge & Adams, Richard H., Jr. & Lopez-Feldman, Alejandro, 2005. "Remittances, Inequality and Poverty: Evidence from Rural Mexico," Working Papers, University of California, Davis, Department of Agricultural and Resource Economics 60287, University of California, Davis, Department of Agricultural and Resource Economics.
  5. Adams, Richard H. Jr., 2004. "Remittances and poverty in Guatemala," Policy Research Working Paper Series 3418, The World Bank.
  6. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(2), pages 549-599, May.
  7. Dean Yang, 2004. "Why Do Migrants Return to Poor Countries? Evidence from Philippine Migrants’ Responses to Exchange Rate Shocks," Working Papers, Research Seminar in International Economics, University of Michigan 513, Research Seminar in International Economics, University of Michigan.
  8. Woodruff, Christopher & Zenteno, Rene, 2007. "Migration networks and microenterprises in Mexico," Journal of Development Economics, Elsevier, Elsevier, vol. 82(2), pages 509-528, March.
  9. Barham, Bradford & Boucher, Stephen, 1998. "Migration, remittances, and inequality: estimating the net effects of migration on income distribution," Journal of Development Economics, Elsevier, Elsevier, vol. 55(2), pages 307-331, April.
  10. Schmertmann, Carl P., 1994. "Selectivity bias correction methods in polychotomous sample selection models," Journal of Econometrics, Elsevier, Elsevier, vol. 60(1-2), pages 101-132.
  11. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, Econometric Society, vol. 51(2), pages 507-12, March.
  12. Adams, Richard H., Jr., 1991. "The effects of international remittances on poverty, inequality, and development in rural Egypt:," Research reports, International Food Policy Research Institute (IFPRI) 86, International Food Policy Research Institute (IFPRI).
  13. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  14. de la Briere, Benedicte & Sadoulet, Elisabeth & de Janvry, Alain & Lambert, Sylvie, 2002. "The roles of destination, gender, and household composition in explaining remittances: an analysis for the Dominican Sierra," Journal of Development Economics, Elsevier, Elsevier, vol. 68(2), pages 309-328, August.
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Citations

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Cited by:
  1. World Bank, 2011. "Tackling Poverty in Northern Ghana," World Bank Other Operational Studies 2755, The World Bank.
  2. Charles Ackah & Denis Medvedev, 2012. "Internal migration in Ghana: determinants and welfare impacts," International Journal of Social Economics, Emerald Group Publishing, Emerald Group Publishing, vol. 39(10), pages 764-784, August.
  3. Adams, Richard H., Jr. & Cuecuecha, Alfredo, 2010. "The economic impact of international remittances on poverty and household consumption and investment in Indonesia," Policy Research Working Paper Series 5433, The World Bank.
  4. Yaw Nyarko and Kwabena Gyimah-Brempong, 2011. "Social Safety Nets: The Role of Education, Remittances and Migration," EUI-RSCAS Working Papers, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS) 26, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  5. Karamba, Wendy R. & Quiñones, Esteban J. & Winters, Paul, 2011. "Migration and food consumption patterns in Ghana," Food Policy, Elsevier, Elsevier, vol. 36(1), pages 41-53, February.
  6. Delphine Boutin, 2011. "Envoi de fonds et allocation du temps des enfants au Niger : L'effet indirect des chocs négatifs," Working Papers hal-00637607, HAL.

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