Do Remittances Reduce Poverty and Inequality of Sending Regions? - A Case Study of Mexico -

Abstract

Mexico is a region with the largest number of outbound migrants in the world, and as a result one with the largest amount of remittance inflows. This study examines the impact of remittances on poverty and inequality in Mexico using state-level data. We present empirical evidence based on a panel data analysis of 32 states of Mexico from 2008 to 2018 to suggest that remittances reduce the poverty and inequality in migrant-sending regions. The reason larger remittances lead to lower poverty and lower income inequality in Mexico seems to be because of the characteristics of Mexican migrants, who are mostly from lower-income households and have lower education levels. The results suggest that the poverty and inequality in sending regions are reduced as the poorest people of the region get out of poverty by receiving larger amounts of remittances.