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International Remittances and Income Inequality: An Empirical Investigation

  • Valerie Koechlin
  • Gianmarco Leon

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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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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  17. 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.
  18. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  19. Li, Hongyi & Squire, Lyn & Zou, Heng-fu, 1998. "Explaining International and Intertemporal Variations in Income Inequality," Economic Journal, Royal Economic Society, vol. 108(446), pages 26-43, January.
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