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Do remittances alleviate poverty and income inequality in poor countries? Empirical evidence from sub-Saharan Africa

  • Adenutsi, Deodat E.

An attempt has been made in this paper to examine the impact of international remittances on poverty and income inequality in sub-Saharan Africa (SSA). In carrying out the study, 34 SSA countries for which relevant data are available, between 1980 and 2009, were sampled for the poverty analysis whilst a sample size of 36 was used in the remittances-income inequality exploration. A set of dynamic panel-data models was estimated using system Generalized Method of Moments. It was found that remittances have significant poverty-alleviating effect, with the poorest of the poor being the least beneficiaries. Additionally, International remittances have income equalisation effects in countries with relatively narrower income gap, but with an intensifying income-inequality aggravating effects in countries with relatively wider income gap. It is, thus, concluded that although remittances have huge potentials to alleviate poverty and equilibrate incomes in SSA, these remittances have size-effects to the detriment of relatively poorer countries and countries with relatively higher income gap. Therefore, the paper recommends that, although the poverty-alleviating effects and income equalisation effects of remittances cannot be downplayed, it is imprudent for SSA policymakers to overly exclusively on remittances as a poverty-reduction strategy towards sustainable socioeconomic development of the sub-region.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37130.

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Date of creation: 14 Sep 2011
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Handle: RePEc:pra:mprapa:37130
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  1. Gupta, Sanjeev & Pattillo, Catherine A. & Wagh, Smita, 2009. "Effect of Remittances on Poverty and Financial Development in Sub-Saharan Africa," World Development, Elsevier, vol. 37(1), pages 104-115, January.
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  3. Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund.
  4. José Ernesto López-Córdova, 2006. "Globalization, migration and development : the role of Mexican migrant remittances," INTAL Working Papers 1440, Inter-American Development Bank, INTAL.
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  9. Adenutsi, Deodat E., 2009. "Long-run macroeconomic impact of international migrant remittances on human development in low-income countries: A panel analysis of sub-Saharan Africa," MPRA Paper 37115, University Library of Munich, Germany.
  10. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  11. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  12. Adenutsi, Deodat E. & Ahortor, Christian R.K., 2010. "International remittances – the panacea for underdevelopment? A comparative panel data analysis of Sub-Saharan Africa and Latin America," MPRA Paper 29349, University Library of Munich, Germany.
  13. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  14. Acosta, Pablo & Calderon, Cesar & Fajnzylber, Pablo & Lopez, Humberto, 2007. "What is the impact of international remittances on poverty and inequality in Latin America ?," Policy Research Working Paper Series 4249, The World Bank.
  15. Stark, Oded & Taylor, J Edward & Yitzhaki, Shlomo, 1986. "Remittances and Inequality," Economic Journal, Royal Economic Society, vol. 96(383), pages 722-40, September.
  16. Adams, Richard H, Jr, 1991. "The Economic Uses and Impact of International Remittances in Rural Egypt," Economic Development and Cultural Change, University of Chicago Press, vol. 39(4), pages 695-722, July.
  17. Lipton, Michael, 1980. "Migration from rural areas of poor countries: The impact on rural productivity and income distribution," World Development, Elsevier, vol. 8(1), pages 1-24, January.
  18. David Mckenzie & Hillel Rapoport, 2004. "Network Effects and the Dynamics of Migration and Inequality: Theory and Evidence from Mexico," Working Papers 2004-3, Bar-Ilan University, Department of Economics.
  19. 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.
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  23. Adams, Richard Jr. & Page, John, 2005. "Do international migration and remittances reduce poverty in developing countries?," World Development, Elsevier, vol. 33(10), pages 1645-1669, October.
  24. Gustafsson, Bjorn & Makonnen, Negatu, 1993. "Poverty and Remittances in Lesotho," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 2(1), pages 49-73, May.
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