DOES REMITTANCES REDUCE POVERTY? AN EMPIRICAL EVIDENCE IN SELECTED DEVELOPING COUNTRIES

Abstract

This study has examined the impact of remittances on poverty in developing countries from 1981 to 2010 for 54 developing countries. The main contribution of our work show that remittances have significantly decreased the level, depth and severity of poverty in developing countries. Different from the existing studies which have used the traditional panel estimators, this study utilizes the dynamic panel estimators such as System-GMM to tackle the specification issues of endogeneity, measurement errors and heterogeneity. We find that 1 percent increase in remittances decreases the poverty headcount by 0.41 percent.