Do International Remittances Alleviate or Aggravate Poverty in Developing Countries?: A Panel Data Analysis

Abstract

This study investigated the effect of the surging increase in international remittances on poverty level in developing countries controlling
for income, inequality, and other sources of external funding. Using the newly-suggested remittance variable, panel data analysis was
applied across 66 developing countries for nine panel years from 1981 to 2005. With the use of pooled ordinary least square (OLS)
method, results showed that international remittances may have helped in alleviating poverty in developing countries as manifested
by the significant negative relationship of remittances on dimensions of poverty such as level, depth and severity of poverty. However,
the significance of this alleviating effect of remittances disappeared when using panel data approach which implies that the alleviating
effect of remittances on poverty is less apparent in developing countries when controlling for individual country-specific effect.