BRIDGING BORDERS, ALLEVIATING POVERTY: THE ROLE OF INTERNATIONAL REMITTANCES

Abstract

This paper examines the impact of international remittances on poverty. A three-stage least squares model is used to examine whether there is a two-way relationship between poverty and international remittances. Rising poverty levels create incentives for migration abroad, with immigrants sending remittances back to their country of origin, thereby reducing poverty. Higher household incomes are associated with a decline in poverty, while growing income inequality tends to exacerbate poverty. In addition, trade openness has a positive effect on international remittances, and in financially developed economies, official remittances flow more smoothly as transaction costs decline. By channeling international remittances, which are recognised as a stable source of financial support, into the accumulation of physical and human capital, they contribute to economic development and enhance their impact on poverty reduction. This study makes a notable contribution to the literature by using the latest comprehensive dataset and an econometric methodology. It also distinguishes the impact of international remittances on poverty using income group-specific and region-specific considerations.