What is the Impact of International Remittances on Poverty and Inequality in Latin America? (original) (raw)

Remittances and Development in Latin America

World Economy, 2006

Flows of workers’ remittances have become a major source of external finance for developing countries and are particularly important in Latin America and the Caribbean, where they are estimated to have reached $40 billion in 2004. Not surprisingly, academics, policymakers and development practitioners in general have been devoting increasing attention to the potential development impact that these flows may have on receiving countries. This paper contributes to this debate along four dimensions. First, it reviews the evolution of remittances flows to Latin America, using Balance of Payments data, and compares these statistics with estimates of remittances income based on Household Surveys. Second, the paper describes the varying profile of remittances recipients in ten Latin American countries. Third, the paper reviews the few macro- and microeconomic studies that have estimated the impact of remittances on poverty and inequality. Finally, the paper expands some of the existing works to investigate the extent to which that impact is different in Latin America and varies across countries in the region.

Do Remittances Promote Economic Growth and Reduce Poverty? Evidence from Latin American Countries

Economies, 2020

In this study, we explore the hypotheses that (a) workers’ remittances enhance economic growth in Latin American countries, and (b) workers’ remittances help reduce poverty in Latin American countries. In recent decades, workers’ remittances have become an important source of income for many developing countries and, as a global aggregate, workers’ remittances are the largest source of foreign financing after foreign direct investment. This paper analyzes the effects of workers’ remittances on economic growth and poverty in 21 Latin American countries. The study uses annual data covering all Latin American countries for the period 1980–2018. We employ panel least squares and panel fully-modified least squares (FMOLS) methods. In addition, we estimate the short-run and long-run effects of workers’ remittances on economic growth and poverty on individual countries with the Autoregressive Distributed Lag (ARDL-ECM) approach to co-integration analysis. The results reveal that workers’ r...

Does Remittances Reduce Poverty ? An Empirical Evidence in Selected Developing Countries

2018

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.

Remittances, Institutions, and Inequality in Developing Countries

Journal for the Advancement of Developing Economies, 2018

The private transfers sent by immigrant workers back to their home countries, or remittances, can improve the development of recipient countries through poverty reduction, higher education, and new business formation. However, the effect of remittances on income inequality is still debatable. While some studies suggest that these transfers are sent to the poor, other investigations find that remittances are directed toward higher-income cohorts, widening the gap between rich and poor. This study provides new evidence about potential income inequality reduction driven by remittances and quality of institutions. For instance, weak institutions discourage the usage of remittances toward productive ventures, more so among poor families. Middle- and high-income groups tend to be better prepared to reduce their exposure to the damages of weak institutions. We constructed instrumental variables and completed two-stage least square (2SLS) analysis to address possible causality bias, a problem so pervasive in this type of empirical studies. Using a set of 25 institutional indicators, we find that remittance recipient countries with better institutions have more meaningful reduction in income inequality. This effect is stronger among heavy remittance-recipient countries.

Remittances and their microeconomic impacts: evidence from Latin America

2006

The flow of remittances to Latin American and Caribbean countries is the highest and fastest growing in the world, exceeding foreign direct investment and net official development assistance to the region. Remittances surpass tourism income and almost always exceed revenues from the largest export in these countries, accounting for at least 10 percent of gross domestic product in six of them. Furthermore, remittances are the least volatile source of foreign exchange in many of these economies, thus playing a crucial role in economic development. ; In what follows, I provide a general overview of the remitting patterns of migrants to the U.S. who are from Costa Rica, the Dominican Republic, Haiti, Mexico, Nicaragua, and Peru. Subsequently, I summarize some microeconomic evidence of the impact that remittances have on various spheres of economic development, as is the case with employment, business ownership, education, and health care investments in two LAC economies. These findings ...