Abstract
ABSTRACT This paper investigates dynamic effects of remittances on households’ poverty and income distribution. Using state-of-the-art matching techniques, we measure impacts based on counterfactual scenarios, and make a step forward by applying for the first time a dose-response function approach to assess poverty effects due to variations in the time-length of receiving remittances. Our results suggest that remittances alleviate both absolute and relative poverty levels and lead to a marginal increase in inequality in the case of Kosovo. We further demonstrate that – although poverty reduction effects are stronger in the short-run – remittances have a positive poverty reduction effect over time. These findings have important welfare policy implications for low- and middle income economies with a high dependency on remittances.
Highlights
Just recently, remittances to low – and middle-income countries rebounded to a record level in 2017 (World Bank 2018)
We utilize a rich household-level data set from the 2011 UNDP Kosovo Remittance Household Survey and provide empirical results that contribute to closing a gap in research by highlighting remittances effects in the highly remittance-dependent, but under-researched Eastern European transition economies
Our study provides new empirical evidence on the causal linkages between remittances, poverty and inequality by applying the described combination of propensity score matching (PSM) and dose-response estimations on a cross-sectional dataset from the 2011 Kosovo Remittance Household Survey (KRHS)
Summary
Remittances to low – and middle-income countries rebounded to a record level in 2017 (World Bank 2018). The UN 2030 Agenda for Sustainable Development rightly calls for more scientific-based evidence on migration effects (UN 2015) In response to this call, our study suggests an innovative combination of econometric methods in order to provide new empirical evidence to the debate on the causal linkages between remittances, poverty and inequality. The application of the method to the case of dynamic effects of remittances on poverty allows for completely new and highly useful insights into longitudinal effects of receiving remittances even in typical cross-sectional research designs The combination of both methods is applied for the first time to remittances’ analysis in this paper. We utilize a rich household-level data set from the 2011 UNDP Kosovo Remittance Household Survey and provide empirical results that contribute to closing a gap in research by highlighting remittances effects in the highly remittance-dependent, but under-researched Eastern European transition economies.
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