The effects of remittances on poverty alleviation in transition countries

Abstract

This paper examines the impact of remittances on poverty measures in transition economies using the panel data for the sample of nine countries in the period of 2002-2013. LSDV (Least Squares Dummy Variable) model with panel-corrected standard errors is used for estimation of remittance effects. The results show that remittances have a significant impact on each of the three poverty measures. Taking into consideration the endogenous regressor problem, a 10-percent increase in remittances per capita will lead to a decline, on average a 4.7 percent in poverty headcount, and also 5.2 percent in poverty depth and 5.8 percent in poverty severity. These results can be important for defining the policy measures on providing more efficient management of remittances.