Abstract
There is a continuing debate over the impacts of migration on the developing nations despite the ever-increasing size of internal and international remittances. Moreover, a little attention has been paid to analyze the impact of these financial transfers on poverty and inequality of those countries. This study, using a nationally representative sample, assessed the impacts of migration and remittances on poverty and inequality of estate sector households of Sri Lanka. A multinomial logit-ordinary least squares two-stage selection control model and a simulation analysis were used to estimate the impact of migration and remittances on poverty and inequality. Results reveal that internal and international remittances reduce poverty incidence by 2.14% and 2.32%, depth of poverty by 1.33% and 0.98%, and severity of poverty by 0.63% and 0.48%, respectively. Results further suggest that income inequality slightly decreased due to internal and international remittances. Moreover, the findings support a growing view in the literature that migration is a livelihood strategy and it helps in alleviating poverty.
Highlights
Migration and remittances play a significant role in developing economies by enhancing social wellbeing of those nations
The results of the econometric estimations and simulations performed in this study clearly show that migration and remittances increase household income and reduce poverty and income inequality of the estate sector of Sri Lanka
Poverty incidences of internal migrant and international migrant households decrease from 9.67% to 7.53% and 6.97% to 4.65% respectively
Summary
Migration and remittances play a significant role in developing economies by enhancing social wellbeing of those nations. Remittances play a crucial role in financial dynamics of rural households and have proved to help reduce poverty, relax credit constraints and improve living standard of rural households of developing nations. Sri Lanka has maintained a significant position as one of the migrant-sending countries since 1980 and currently over a million of Sri Lankan migrants work in Persian Gulf Region and Middle East countries. As their migration status, especially in Middle East countries, is temporary, a large portion of migrants’ earnings is sent as remittances while they stay, or they bring their earnings when they return.
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