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.