The Impact of Remittances on Poverty Alleviation in Developing Countries

Abstract

This study examines the influence of remittances on poverty alleviation in developing countries. The data from eighteen developing countries is used for the years 2001 to 2020. For data analysis, panel unit root tests, Pedroni cointegration test and panel ARDL model are used. The study found that foreign remittances are negatively and significantly related to the poverty eradication. Similarly, gross fixed capital formation, labor force participation rate, trade and human capital are negatively and significantly while the variable inflation rate positively and significantly related to the poverty in developing countries. Considering the study's outcomes, it is concluded that remittances are crucial in mitigating the poverty level in developing countries. Therefore, it is recommended that governments should provide migration-friendly measures, such as incentives for workers to travel overseas and remit funds legally rather than illegally. Low-income families would benefit from this, but it would also help the government increase its foreign reserve.