Effect of remittances on household consumption in African and Asian countries: A quantile regression approach

The impact of remittances on poverty has stimulated a number of empirical studies. However, these studies have relied on a regression framework in which the analysis is focused on the mean effects of remittances. In this paper, we use a quantile regression method to examine the effect of remittances on household consumption in African and Asian countries at various locations of the consumption distribution. The results show that remittances significantly increase household consumption and the effect is larger at lower levels of consumption. If remittances are to be used as a poverty-reducing tool, African and Asian countries should do more in reducing transaction costs and bringing recipient households into the formal financial sector in order to channel their savings into productive uses that can generate long-term benefits.