“Being Poor Because of No Money”: Examining the Impact of International Remittance Inflows on Reducing Poverty

International remittance is an important source of foreign capital for the developing and less developed countries. The remittance has become a focal issue in economic literature for over two or more decades, because of its rise in volume as well as its potentiality in reduction in poverty in many of these countries. It is also observed that the flows of remittance have continued to increase together with the rise in migrants’ number around the world. Reasonably significant inflows of remittances into the economies of the developing countries have macroeconomic effects, which may have critical and important implications for many of these countries. However, available studies show different types of results with respect to the effects of remittances on economic growth. These studies also differ in their methodologies. In the context of the Bangladesh economy, remittance plays an important role in terms of its contribution to the gross national income and foreign exchange earnings. Anecdotal evidence suggests that remittance has helped alleviating poverty for many of the households, both in the rural and urban areas. However, there is very little systematic research with a view to exploring the link between remittance and poverty in the context of the Bangladesh economy. Large inflows of remittances had macroeconomic and developmentalimplications for Bangladesh’s economy. Over the years, Bangladesh has moved away from aid dependency. Remittance also plays a critical rolein providing the foreign currency and financing the trade deficit of Bangladesh. Raihan et al. (2009) showed that there was a strong multiplier effect of these remittances on the rural areas of Bangladesh, such as through increased consumption spending and increased investment on health and education relative to non-migrant families, and also through the establishment of enterprises and small businesses by returnee migrants or their family members, which are generating employment and creating markets for locally produced goods and services. Using household data and CGE model, Khondker and Raihan (2009) showed a large impact of remittances on reduction in poverty in Bangladesh. Against this backdrop, this study examines the impact of remittances onhouseholds’ expenditure, savings and investment behaviour in Bangladesh. This chapter uses a cross-section econometric analysis exploring the links between remittances and expenditure for the households using the latest household survey data from RMMRU.

In 2004 the United Nations University World Institute for Development Economics Research (UNU-WIDER) embarked on a large-scale research project on the ‘Impact of Globalization on the World’s Poor’ co-directed by Machiko Nissanke and Erik Thorbecke. The first conference was essentially conceptual in nature, meant to understand better the various mechanisms and channels through which globalization affects the poor either directly or indirectly. The other three conferences focused on each of the major regions of the developing world: Asia, Africa and Latin America. Theobjectivesofthisintroductionarethreefold:first,toreviewbrieflyhow the forces of globalization influence poverty in general; second, to describe and discuss the main transmission channels and mechanisms; and third to analyze the impact of globalization on Africa and present an overview of the six Africa case studies included in this issue. 1. The Impact of Globalization on the World’s Poor Globalization provides a strong potential for a major reduction in poverty in the developing world because it creates an environment conducive to fastereconomicgrowthandtransmissionofknowledge. 1 However,structural factors and policies within the world economy and national economies have impeded the full transmission of the benefits of the various channels of globalization for poverty reduction. In particular sub-Saharan Africa (SSA) hasbeenrelativelylessaffectedbytheforcesofglobalizationthanotherparts of the world. World income distribution continues to be very unequal and many poor countries particularly in Africa are stagnating. Moreover, there is much empirical evidence that openness contributes to more within-country

This study researches the impact of international remittances on poverty reduction in six former Soviet Union countries. The countries where personal international remittances are equal to more than 5% of GDP and rents from natural resources are below 10% of GDP are selected as the units of measurement. This study uses a fixed effect model with robust standard errors to reveal any types of causality. According to the regression results, a 10% increase in remittance inflow reduces headcount ratio, poverty gap, and poverty severity at $1.90 per day poverty line by 4.8, 5.9 and 6.4%, respectively. In addition, the same level of increase in remittances reduces poverty headcount ratio by 3.3% and poverty gap by 3.7% at the poverty line of $3.20 per day. Additionally, pooled OLS regression results reveal that remittance inflow has a negative impact on poverty level in the above-mentioned six resource-poor countries.

Abstract: International remittances flowing into developing countries are attracting increasing attention because of their rising volume and their impact on recipient countries. This paper uses a panel data set on poverty and international remittances for African countries to examine the impact of international remittances on poverty reduction in 33 African countries over the period 1990–2005. We find that international remittances—defined as the share of remittances in country GDP—reduce the level, depth, and severity of poverty in Africa. But the size of the poverty reduction depends on how poverty is being measured. After instrumenting for the possible endogeneity of international remittances, we find that a 10 percent increase in official international remittances as a share of GDP leads to a 2.9 percent decline in the poverty headcount or the share of people living in poverty. Also, the more sensitive poverty measures—the poverty gap (poverty depth) and squared poverty gap (poverty severity)—suggest that international remittances will have a similar impact on poverty reduction. The point estimates for the poverty gap and squared poverty gap suggest that a 10 percent increase in the share of international remittances will lead to a 2.9 percent and 2.8 percent decline, respectively, in the depth and severity of poverty in African countries. Regardless of the measure of poverty used as the dependent variable, income inequality (Gini index) has a positive and significant coefficient, indicating that greater inequality is associated with higher poverty in African countries, much in conformity with the literature. Similar results were obtained for trade openness. In the same vein, per capita income has a negative and significant effect on each measure of poverty used in the study. Our results also show that inflation rates positively and significantly affect poverty incidence, depth and severity in Africa. In all three poverty measures, the dummy variable for sub‐Saharan Africa is strongly positive, and strongly negative for North Africa. The policy implications of these results are discussed.

ABSTRACTThe United Nations' primary sustainable development goal is to end all forms of poverty globally, and thus, reducing poverty has emerged as a key objective for national development across countries. Taking this into account, this study aims to explore the influences of financial inclusion and remittance inflow on poverty reduction in selected South Asian countries, considering per capita income as a control variable. To complete the investigation, we utilize the second‐generation unit root assessment, the Driscoll–Kray (D‐K) robust standard error estimation method, and the “Dumitrescu–Hurlin” (D‐H) causality experiment that supports cross‐sectional dependency. The D‐K estimations reveal that financial inclusion has an impact on lowering the poverty gap as well as the headcount of poverty. At the same time, remittance inflow exerts a significant effect on poverty reduction regardless of the headcount, gap, or severity, and increasing per capita income has been a major factor in mitigating poverty in South Asia. The findings have significant policy ramifications. To combat poverty and promote inclusive development, policymakers should integrate financial inclusion, remittance inflow, and per capita income, increase access to appropriate and reasonably priced financial services, fortify remittance corridors, and advance financial literacy among people.

This study investigates impacts of migration through remittances on poverty reduction in Vietnam by using the two most recent Vietnam Household Living Standard Surveys in 2014 and 2016. Results of a fixed-effect logit and a fractional logit model show that although both internal remittances and international remittances increase per capita income only internal remittances have positive impacts on poverty incidence and poverty intensity. In addition, by testing impacts of remittances on pushing a household jump above the poverty line and its effects on the depth of poverty, this study has revealed poverty reduction effect of remittances more fully. Based on the findings the study suggests that it is important to acknowledge the benefits of internal migration. For the purpose of poverty alleviation, policies that attract remittances should be given greater attention.

The role of migration and remittances sent by the migrants is a matter of debate in the existing literature on migration research. Using the nationally representative data from the 64th round of National Sample Survey, this paper contributes to the debate about the impact of internal and international remittances on poverty reduction in Uttar Pradesh and Bihar. In the list of states in India, these two states are often placed at the top, for their high out-migration rates and low progress in social and economic indicators. This paper begins with a discussion of migration, remittances and poverty at the household level. A huge diversity exists in the utilisation of internal and international remittances in the areas of origin. The estimate reveals that internal and international remittances not only reshape the life chances of remittances receiving households but also fulfil the diverse non-food necessities. The result from the multivariate logistic analysis shows that households from rural areas received higher remittances compared to urban area. Thus, it gives strength to absorb the risks and shocks of catastrophic health, marriage expenditure and incidence of crop failures to the rural households. In line with an optimistic view, the findings of the present study show that remittances based migration enhances the socio-economic status and reduces poverty of migrant households. Based on propensity score matching technique, the results also show that the impact of international remittances on reducing household poverty out-weigh that of the internal remittances in Uttar Pradesh, but in Bihar, domestic remittances play a significant role in reducing poverty at the household level than international remittances.

Internal and external migration can have a profound impact on rural asset accumulation in most Third World countries. In many African, Asian, and Latin American countries the bulk of the labor force still lives in the countryside. In these countries the large difference between expected rural and urban or foreign incomes, coupled with the risk-reducing functions of migration, causes workers to migrate, either to urban centers or abroad. The remittances—defined as the money or goods sent home by migrant workers—can have a large effect on the accumulation of assets in these rural areas. For example, an inflow of external remittances to rural households at the upper end of the income distribution could increase land accumulation by the rich. In general terms the effect of remittances on asset accumulation in a rural Third World economy depends on answers to three questions: (a) Who migrates? (b) How much net income do migrants remit? and (c) What are the marginal effects of these remittances on household consumption and investment? Because of data limitations, in this article I propose to examine only the first and the third questions; other researchers have addressed the second issue. In the past surprisingly little attention has been focused on the question of the marginal effects of remittances on household consumption and investment in the rural Third World. This inattention has been due to three considerable methodological problems. The first is fungibility; because remittances are like any other form of cash income, it is difficult to associate this income source with any particular changes in household expenditure behavior. The second problem relates to the multiple-round effects of remittances on the local economy. For example, an inflow of remittances into a rural area may lead to a surge in expenditures in housing, which may, in turn, create new income and employment opportunities for the poor and unskilled. Unfortunately, however, few studies have

This study examines the relationship among remittances, growth and poverty reduction in Nigeria. Secondary data from the World Development Indicators was utilized from 1981-2019. ARDL Bounds test and Granger causality techniques were employed in analyzing the objective of the study. Consequently, the major findings in this study could be submitted as follows: GDP per capita has a positive and significant relationship with migrant remittances. Furthermore, economic growth motivates poverty reduction in the country. Hence, it could be concluded that migrant remittances and growth are important economic variables that drive poverty reduction in Nigeria. Moreover, following the emergence of these important findings, these pertinent recommendations are therefore made for the policymakers in Nigeria and Africa by extension, that whenever poverty reduction is the goal of these policymakers, implementation of the policies that would stimulate sporadic inflows of migrant remittances should be embarked upon. Similarly, policies that will ensure double digit growth rate in sustainable manners in the country should be embarked upon by the policymakers.

Urbanization has been argued to be having an impact on several other development challenges. To this end, this paper aims to contribute to the empirical literature by exploring the effect of urbanization and its' magnitude on poverty, both in the short run and long run in Nigeria. The macroeconomic analysis was conducted using data from 1982 to 2017 which was obtained from the World Bank. Bound Test and autoregressive distributed-lag (ARDL) estimation techniques were used to test the existence of a cointegration relationship and to estimate the short and long-run effect of urbanization and other variables on poverty reduction. Results from the study and an economic standpoint, provide strong evidence that urbanization remains an important factor in poverty reduction in Nigeria. The analysis further shows that while international remittances have a positive and significant effect, foreign aid and government expenditure have significant negative effects on poverty reduction in the long-term period. While findings from this study suggest that urbanization remains a valid tool in the fight against poverty, the need for sustainable urbanization policies and efforts by the Nigerian government is highly imperative.

International remittances of migrants to their home countries offer massive potential to contribute to poverty reduction goals. However, despite the welfare gains associated with remittances and their impact on poverty reduction, the average cost of remittances remains more than double the Sustainable Development Goals (SDGs) target of 3%. However, newly evolving technologies such as blockchain and distributed ledger technology (DLTs) can help to achieve this target. To support the migration-related SDGs and poverty reduction, it is crucial to utilize recent technological innovations and establish legal channels of remittance transactions. Developing Asia requires to let new players, such as blockchain remittance companies and DLT-based applications, operate through banks, national post offices, and telecommunication companies to increase competition and lower remittance costs. This chapter explores the recent literature on the significant potential of remittances for poverty reduction and the importance of financial sector adaptation with new technological megatrends in the payments system to increase financial inclusion. Furthermore, it will investigate new business models for cost reduction and finding ways to make remittance cheaper. The chapter will provide several case studies and policy recommendations.

In September 2001, the Danish Ministry of Foreign Affairs commissioned a study of the present and potential links between migration and development. In January 2002, the new Danish Government announced a decision to enhance the links between its aid and refugee policies as part of the overall focus on poverty reduction. The present paper provides a state–of–the–art overview of current thinking and available evidence on the migration–development nexus, including the role of aid in migrant–producing areas. It offers evidence and conclusions around the following four critical issues:Poverty and migrationPeople in developing countries require resources and connections to engage in international migration. There is no direct link between poverty, economic development, population growth, and social and political change on the one hand, and international migration on the other. Poverty reduction is not in itself a migration–reducing strategy.Conflicts, refugees, and migrationViolent conflicts produce displaced persons, migrants, and refugees. People on the move may contribute both to conflict prevention and reconciliation, and to sustained conflicts. Most refugees do not have the resources to move beyond neighbouring areas, that is, they remain internally displaced or move across borders to first countries of asylum within their region. Aid to developing countries receiving large inflows of refugees is poverty–oriented to the extent that these are poor countries, but it is uncertain what effect such aid has in terms of reducing the number of people seeking asylum in developed countries. Furthermore, such aid may attract refugees from adjacent countries experiencing war or political turmoil.Migrants as a development resourceInternational liberalization has gone far with respect to capital, goods and services, but not to labour. International political–economic regimes provide neither space nor initiatives for negotiations on labour mobility and the flow of remittances. There is a pressing need to reinforce the image of migrants as a development resource. Remittances are double the size of aid and target the poor at least as well; migrant diasporas are engaged in transnational practices with direct effects on aid and development; developed countries recognize their dependence on immigrant labour; and policies on development aid, humanitarian relief, migration, and refugee protection are internally inconsistent and occasionally contradictory.Aid and migrationAid policies face a critical challenge to balance a focus on poverty reduction with mitigating the conditions that produce refugees, while also interacting constructively with migrant diasporas and their transnational practices. The current emphasis on aid selectivity tends to allocate development aid to the well performing countries, and humanitarian assistance to the crisis countries and trouble spots. However, development aid is more effective than humanitarian assistance in preventing violent conflicts, promoting reconciliation and democratization, and encouraging poverty–reducing development investments by migrant diasporas.The paper is a synthesis of current knowledge of migration–development dynamics, including an assessment of the intended and unintended consequences of development and humanitarian policy interventions. We examine whether recent developments in the sphere of international migration provide evidence of a “crisis”, as well as the connections between migration, globalization, and the changing nature of conflicts. We summarize current thinking on the main issues at stake and examine available evidence on the relations between migration and development. Then the consequent challenges to the aid community, including the current debates about coherence and selectivity in aid and relief are discussed and, finally, we elaborate on the four conclusions of the overview.

Unlike previous empirical studies, this paper investigates the contemporaneous and lagged impacts of international remittances on poverty alleviation using data for 65 low- and- middle-income countries from 2002 to 2016. By using two-stage least square (2SLS) regression analysis, this study establishes that, in general, international remittances per gross domestic product (GDP) significantly mitigate poverty. On average, a 10-percentage-point increase in remittances will lead to a similar decrease in the poverty headcount ratio at USD 1.90 a day, a 4.8-percentage-point decline in poverty gap ratio at USD 1.90 a day, and a 6.7-percentage-point reduction in the poverty gap ratio at USD 3.20 a day. This result remains robust with the inclusion of political factors in the model. Moreover, the system-generalized method of moments (SGMM) estimations found that the contemporaneous effects of international remittances are much more substantial than their lagged effects. This indicates that most of the poverty alleviation role of remittances is contributed by its direct effect on increasing the wealth index of recipient households rather than the spillover effect on other members of the community. Therefore, we strongly suggest that efforts be made to improve the remittance infrastructures, especially in recipient countries, and the development of cooperatives in the enclaves of migrant workers to spread the beneficial effects of remittances to all members of society.

Ensuring access to and usage of formal financial services through digital devices can be referred to as “digital financial inclusion” (DFI). In recent years, there has been a growing trend in the use of financial services, including money transfers through mobile phones. This study applies mobile phone subscriptions as a proxy to measure the degree of DFI and explores the individual effects of DFI and remittances and their interaction effects on poverty conditions in developing countries. Using panel data from 2000 to 2020 for 123 countries and employing the dynamic generalized method of moments estimation, the results reveal that DFI and remittance inflows help ameliorate poverty in developing countries. Furthermore, we find that the coefficient of the interaction term between DFI and remittances is statistically significant and positive, suggesting that the impact of DFI on poverty alleviation could weaken as remittance inflows increase in the remittance-receiving country and vice versa.

While international remittance inflow is globally recognized as a key source of income for improved standard of living and poverty reduction, there is an ongoing intellectual debate that persistent remittance inflow causes deterioration in trade balances, by inducing import-led consumption expenditures, especially in developing countries like Nigeria. The study investigated the impact of international remittance inflows on Nigeria’s trade balances from 1990 to 2016. The study uses the contemporary econometric techniques of Zivot-Andrew (ZA) structural break unit root test, as well as the Gregory- Hansen cointegration test that allows for a single most significant unknown structural break in both the intercept and the entire coefficient vectors. The results show that remittance inflows to Nigeria have significant negative effect on trade balance, meaning that the Dutch disease effect of remittance inflows prevails in Nigeria. Based on this finding, the study recommends that the remittance inflows to Nigeria should follow the channel of private savings which, in turn, is released to productive domestic investment in order to expand the pool of manufactured products. This will definitely overcome the Dutch disease symptom being experienced in Nigeria.