Remittances and Working Poverty

Abstract

This article shows that the level and the predictability of remittances reduce working poverty in receiving economies through their effects on labour market dynamics. It takes advantage of the new cross-country dataset (ILO, KILM 7th edition) containing information on the share of individuals working for less than US$2 per day. To identify the main impacts, the article proposes a novel approach to deal with the endogeneity of remittances and migration. In addition, the results are robust to the possible error in measuring working poverty, to the potential attrition bias, and to the presence of various control variables.     

Remittances,Poverty, Inequality and Welfare: Evidence from the Central Plateau of Burkina Faso

This paper applies Gini and concentration coefficient decomposition as well as the Foster-Greer-Thorbecke poverty index and the Stark-Yitzhaki welfare index to new data from four villages in Burkina Faso, to compare the marginal effects of remittances from intercontinental and intra-African migration on inequality, poverty and social welfare. Evidence is found that intra-African remittances reduce inequality while intercontinental remittances have the opposite effect. Also, it is found that although remittances from intercontinental migration are associated with much lower incidence, depth and severity of poverty, the marginal impact of remittances from this form of migration on social welfare is limited because recipients do not include the rural poor.     

Poverty Transition in Rural Vietnam: The Role of Migration and Remittances

This study combines insights of the New Economics of Labour Migration with the asset-based approach to welfare dynamics using panel household data from Vietnam. This method allows us to determine whether poverty transitions induced by remittances are actually structural, that is, based on asset growth and therefore long term, or stochastic, that is, based only on short-term increases in income, which implies a risk of falling back into poverty. To control for endogeneity of remittances, we use household fixed effects and instrumental variables estimation. The paper shows that remittances have a positive impact on asset growth and that the impact differs with welfare status and ethnicity.     

The Impact of International Remittances on Child Outcomes and Household Expenditures in Nepal

Nepal has one of the highest ratios of international remittances to gross domestic product in the world. We examine whether the massive inflow of international remittances affects child schooling, child labour and household expenses. Controlling extensively for a host of observed characteristics of households and migrants, and using an instrumental variable approach, this research finds no effect of international remittances on child education or child labour in Nepal. However, it does find a significant increase in non-food expenditures, including education spending, due to international remittances. Despite increased expenditure on child education, educational outcomes are not improving because of international remittances.     

Drivers and Dynamics of Internal and International Remittances

This article analyses whether and how intra-household remittance volumes vary with the length of a migrant's absence, and whether the drivers and dynamics of remittance decay depend on the migrant's destination. We address these questions by using data from the 64th round of the Indian National Sample Survey, conducted between July 2007 and June 2008. We find that the average intra-household remittance function follows a curvilinear trajectory that is best approximated by a quartic (M-shaped) specification. The volatility of intra-household remittances is distinct across migration destinations, with international remittance flows being more volatile than internal intra-state or inter-state flows.     

Growth and Chronic Poverty: Evidence from Rural Communities in Ethiopia

This article employs a computable general equilibrium model for Sandinista Nicaragua to argue that a foreign exchange constrained economy does not necessarily fall prey to the inflation‐devaluation‐inflation vicious cycle characteristic of more mature Keynesian economies. It is seen that when the economy is shocked by a devaluation, prices do not rise proportionately. Output increases and the distribution of income can actually improve. These results support Sandinista policy of raising wages along with devaluation, a policy widely criticised as counterproductive. When the model is structured to account for the combined effects of Sandinista policies, however, including rising government expenditure and multiple effective exchange rates, a host of macroeconomic problems experienced by the regime arise. Stagflation sets in, income distribution deteriorates and the incentives for export production seriously diminish.     

The Effects of the Value-Added Tax on Revenue and Inequality

This paper examines the impact of the introduction of the value-added tax on inequality and government revenues using newly released macro data. We present both conventional country fixed effect regressions and instrumental variable analyses, where VAT adoption is instrumented using the previous values of neighbouring countries’ VAT systems as an instrument. The results reveal – in contrast to earlier work – that the revenue consequences of the VAT have not been positive. The results indicate that income-based inequality has increased due to the VAT adoption, whereas consumption inequality has remained unaffected.     

Africa and the Poverty of International Relations

The modern condition of poverty in Africa is a global phenomenon, the outcome of world-historical processes of social change, and reproduced by globally structured social relations. This is obscured in academic analysis. The 20th century division of labour produced an absence of theorising the international from the discipline of Development Studies, and an absence of poverty from the concerns of International Relations. Neither Development Studies nor ir have adequately emphasised or theorised the global production and reproduction of local poverty in Africa. Perhaps this can be remedied, thanks to the increasing attention to studying international relations ‘from below’ in recent critical scholarship. However, methodologically, the current critical approaches in ir and ds are disabled by their abandonment of objectivity and a commitment to explanation. The article concludes by arguing for elaboration of the global political economy of poverty in Africa, as a form of social scientific inquiry with necessarily emancipatory implications.     

Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa

This study explores the extent to which inequality affects the impact of income growth on the rates of poverty changes in sub-Saharan Africa (SSA) compared to non-SSA, based on an unbalanced panel of 86 countries over 1977–2004. For all three measures of poverty – headcount, gap, and squared gap – the impact of GDP growth on poverty reduction is a decreasing function of initial inequality. The impacts are similar in direction for SSA and non-SSA, so that within both regions there are considerable disparities in the responsiveness of poverty to income growth, depending on inequality. Nevertheless, the income–growth elasticity is substantially less for SSA, implying relatively small poverty-reduction response to growth.     

Heterogeneity in the Intrahousehold Allocation of International Remittances: Evidence from Philippine Households

This article shows that heterogeneity in the intrahousehold allocation of remittances sent by temporary international migrant workers exists among households in the Philippines, and may be attributable to the absence of the spouse, suggesting moral hazard, and to the gender and educational attainment of the household head, indicating differences in preferences. GLM estimates and post-estimation tests reveal that male heads spend more on alcohol and tobacco, that the presence of a female decision-maker in a household increases allocations to goods that improve the welfare of the children, and that household heads with less formal education allocate more to education.     

Remittances,Bonds and Bridges: Remittances and Social Capital in Burundi

This study explores the effects of remittances on households’ structural social capital in urban Burundi. Distinctions are made between bonding and bridging social capital, referring to intra- versus inter-network ties of family members and friends. The results demonstrate that remittance-receiving households invest more in bridging social capital by participating in organisations (donating time), but make fewer monetary contributions, compared to non-receiving households. Remittances have mixed effects on bonding social capital: receiving households give significantly less gifts to family members and friends, but are more likely to send internal remittances, compared to non-receivers. The implications of these findings for post-conflict development are discussed.     

Poverty and Inequality in a Rapid Growth Economy: Chile 1990-96

Using parametric and non-parametric methods this article examines the evolution of poverty and inequality in Chile between 1990 and 1996. This period is interesting because of the rapid growth exhibited by the Chilean economy. Using the Datt-Ravallion decomposition economic growth accounts for over 85 per cent of poverty reduction. The evidence suggests that the sustained level of high inequality is not necessarily associated with a lower welfare level. By comparing the evolution of poverty and inequality over time, we observe a continuous decrease in poverty, while inequality remains stable. This pattern has left everyone (both poor and rich individuals) better off.     

The Effects of Democracy on Economic Growth and Inequality: A review

What effects does political democracy have on such development outcomes as economic growth and socioeconomic equality? Competing theoretical models have been proposed that represent each of the possibilities: democracy as facilitating development, democracy as a hindrance to development, and democracy as bearing no independent relationship to development outcomes. Each of these theoretical models is explicated and, then, the evidence from quantitative, cross-national tests of the effects is reviewed. Overall, the evidence provided by the approximately dozen studies for each outcome yields few robust conclusions with respect to the theoretical models. To guide in the evaluation of the evidence, the studies are in turn distinguished by such design characteristics as sample, period observed, measures used, and form of relationship specified. This procedure, while it does not produce definitive support for any of the models, does assist in interpreting the results of past research as well as generating fertile guidelines for future research.     

The Impact of Natural Disasters on Remittances to Low- and Middle-Income Countries

In this paper, we offer novel empirical evidence on the impact of natural disasters on remittance flows towards low- and middle-income countries. We consider a panel of 98 countries over the period 1990–2010. Our findings show that remittances increase after a disaster, thus contributing ex post to the reconstruction process. At the same time, we find that remittances play a key role in terms of ex ante risk preparedness for those countries that experienced more disruptive events in the past. Finally, when taking into account the interaction with the level of development of the local financial sector, remittances seem to substitute for less efficient financial systems both in terms of ex post response to disasters and in terms of ex ante risk management strategy.     

The Fiscal Effects of Aid in Ethiopia: Evidence from CVAR Applications

ABSTRACT

This article explores the fiscal effects of aid in Ethiopia using the Cointegrated Vector Auto-Regressive (CVAR) methodology to model complex long-run and short-run dynamics. We use national data for 1961–2010, including a measure of aid capturing flows through the budget as measured by the recipient. The data suggests three main conclusions on the long-run equilibrium. First, government long-term spending plans are based on domestic sources, treating aid as an additional source of revenue. Second, both grants and loans are positively related to tax revenue. Third, aid is positively associated with spending, with a particularly strong relation between capital expenditure and grants. Overall, our results show that aid in Ethiopia had beneficial fiscal effects.     

The Poverty of Statistics and the Statistics of Poverty

This paper offers a critique of the picture of world growth and world inequality generally disseminated by international agencies. The positive view commonly presented depends on the widespread consensus that economic performance should be measured using ‘Purchasing Power Parity’ (PPP) statistics, instead of market exchange rates. Although originally conceived narrowly as a basis for comparing living standards, PPP indicators are now indiscriminately promoted as an unexceptionable standard for comparing and aggregating national income statistics. This article highlights the flaws in the PPP approach by accepting the claims made on their behalf at face value. It shows that, even on the basis of these claims, the wrong conclusions have been drawn. By comparing PPP and market exchange rate measures of inequality it shows that what really took place, at the end of the last century, was a systematic reduction in the prices of consumption goods in the Third World. PPP statistics have concealed this underlying and unsustainable trend, allowing it to be packaged as a stable reduction in poverty. Neither genuine growth, nor lasting poverty reduction was achieved over this period. The fall in the price of consumer goods masked a systematic failure to overcome the central problem of development—the high price of capital goods, which PPP statistics understate, and of intermediate goods, which they completely omit.     

Social Learning and Farm Technology in Ethiopia: Impacts by Technology,Network Type,and Poverty Status

Improved farm technologies in Ethiopia display high levels of promise and low rates of adoption. This article studies the impact of social networks on technology adoption focusing on social learning through networks based on physical proximity and those based on intentional relationships. Impacts by network type, technology, and asset poverty status are explored. Social learning is more evident for households not in persistent poverty, for more complex technologies, and within networks based on intentional relationships rather than proximity. Results indicate that technology diffusion in Ethiopia is likely to be enhanced if extension can target intentional networks, rather than spatial clusters.     

Poverty Effects from Trade Liberalisation in Argentina

This paper aims at analysing the linkages between trade liberalisation and poverty in Argentina. Under a specific-factors setting, a two-step procedure is presented. In the first stage the change in prices of goods and factors in both tradable and non-tradable sectors, after a trade liberalisation episode, is considered. In a second step, these variations are applied to assess the changes in poverty and household welfare. A micro simulation approach, using household survey data, is applied in this last stage. Poverty is reduced as a result of the policy and the households that benefit from this reduction are those linked to the non-tradable sectors.     

Rising Inequality in Mexico: Household Characteristics and Regional Effects

We use an empirical framework to identify the contributions of microeconomic factors to the sharp rise in household (per capita) income inequality in Mexico between 1984 and 1994. Results indicate that changes in returns to household characteristics, in particular changes in returns to education, are responsible for about half of the increase in the Gini coefficient. The deteriorating conditions in rural areas relative to the urban areas and of the southern region relative to other regions account for another fourth of the increase in the Gini.