Role of international remittances in poverty alleviation: A panel data study of developing countries

Abstract

Remittances are the funds sent by individuals to their home country from the host country and are the main source of foreign funding after FDI. Remittances are a crucial source of subsistence for the countries that are still in developing phase. Due to of the increasing scale and effect on the origin country, the international remittance flows into the developing country have gained the attention of numerous analysts from all over the world. This study examines the role of foreign remittances in poverty alleviation utilizing the panel data set of Asian countries, precisely nine developing countries. For the dependent variable this study uses poverty gap and the independent variables are Remittances as percentage of GDP, Per capita GDP, External debt as percentage of GNI and Trade openness as percentage of GDP. The findings reveal that foreign emittances have a significant role in alleviating poverty gap. The results of the random effect model showed that a 1% increase in international remittances as percentage of GDP leads to a decrease of 65.932% in poverty gap at $1.90 poverty line in the sample developing economies from 1990-2019. In addition, the results indicate, trade openness and per capita GDP decrease poverty and external debt seems to increase poverty.