Remittances to developing countries, especially less developed countries, have been growing tremendously as compared to the past few decades. Nevertheless, whether they can be a critical source of poverty alleviation in developing countries is yet to be conclusively studied. Therefore, this study investigates the implications of remittances on poverty in 44 developing countries from 2006 to 2014.
A dynamic panel estimator is applied to examine remittances – poverty nexus.
The results provide strong evidence that the level of poverty tends to be lower in countries with a higher flow of remittances. This may be because of the increase in the household incomes of the poor by virtue of the remittance, and/or the money remitted might be channeled to more productive activities, indicating the powerful role of remittances to maintain a sustainable reduction in poverty.
Although there is no direct policy applicable to remittances, several areas might be good to be assisted and improved by the government.
