Abstract
In this study, we investigate the impact of remittance inflows on poverty reduction in South Africa, using time series data from 1980 to 2017. The main objective of this study is to establish whether South Africa can harness remittance inflows to alleviate poverty. Two poverty proxies, namely household consumption expenditure and infant mortality rate, are used in this study. To ensure robustness of the results, both income and non-income proxies of poverty are employed. Using the autoregressive distributed lag (ARDL) bounds approach, the study found that remittance has a negative impact on poverty in the short run and in the long run when household consumption expenditure is used as a proxy for poverty. However, when the infant mortality rate is used as a proxy, remittance is found to have no impact on poverty. It can be concluded that the impact of remittance on poverty is sensitive to the proxy used. The study concludes that South Africa could benefit immensely from some forms of remittances in its quest to poverty alleviation.
Highlights
The end of the Millennium Development Goals (MDGs) in 2015, with some of the goals partially achieved, paved the way for the Sustainable Development Goals (SDGs) 2030
The autoregressive distributed lag (ARDL) approach employed in this study does not require a unit root test, the test was done on all the variables included in the model to ascertain that they are integrated of Order 0 (I(0)) or 1 (I(1))
This study investigated the impact of remittance inflows on poverty reduction in South Africa using data from 1980 to 2017
Summary
The end of the Millennium Development Goals (MDGs) in 2015, with some of the goals partially achieved, paved the way for the Sustainable Development Goals (SDGs) 2030. Under the MDGs, the poverty reduction target was achieved in aggregate; but at a country level, a number of developing countries are still struggling with high poverty levels, and South Africa is not an exception. Few studies have been conducted to establish if remittances contribute positively to poverty reduction at the household or national level. Given a dearth of literature on the impact of remittances on poverty levels, on one hand, and the thrust of the SDG spearheaded by the United Nations, on the other hand, another study that explores the direct impact of remittances on poverty levels in South Africa cannot be overemphasized, as it will shed more light on the country’s poverty alleviation policies
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