Remittances and Poverty in Guatemala

Abstract

Adams uses a large, nationally representative household survey to analyze the impact of internal remittances (from Guatemala) and international remittances (from the United States) on poverty in Guatemala. With only one exception, he finds that both internal and international remittances reduce the level, depth, and severity of poverty in Guatemala. However, he finds that remittances have a greater impact on reducing the severity as opposed to the level of poverty in Guatemala. For example, the squared poverty gap - which measures the severity of poverty - falls by 21.1 percent when internal remittances are included in household income, and by 19.8 percent when international remittances are included in such income. This is true because households in the lowest decile group receive a very large share of their total household income (expenditure) from remittances. Households in the bottom decile group receive between 50 and 60 percent of their total income (expenditure) from remittances. When these poorest of the households receive remittances, their income status changes dramatically and this in turn has a large effect on any poverty measure - like the squared poverty gap - that considers the number, distance, and distribution of poor households beneath the poverty line. This paper - a product of the Trade Team, Development Research Group - is part of a larger effort in the group to understand the impact of international migration and remittances on poverty and development.