The Effect of Inward and Outward Remittances on Welfare in Africa
Abstract
We estimated the effect of inward and outward remittances on welfare using data on 17 SSA countries from 2005 to 2019, with welfare proxied as consumption. Previous studies on remittances had tended to be focused more on the effect of inward remittances on macroeconomic variables, while few that considered inward and outward remittances were single-country analysis. The study applied the system-GMM estimation approach to accommodate the dynamic nature of the empirical model. Results showed that inward remittances exerted a positive and significant effect on consumption, while the effect of outward remittances was negative and had a significant effect. However, the coefficient of inward remittances, in absolute terms was found to be larger than the coefficient of outward remittances. The instruments used in the estimation was found to be valid by the Sargan and Hansen tests while the absence of serial correlation was confirmed by the Arrellano-Bond tests. Policy around remittances, given the greater weight of inward remittances on consumption should be such that will make remitting cheaper.
References
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Abduvaliev, M., & Bustillo, R. (2019). Impact of remittances on economic growth and poverty reduction amongst CIS countries. Post-Communist Economies, 1–22.
Addison, T., Pikkarainen, V., Rönkkö, R., & Tarp, F. (2017). Development and Poverty in sub-Saharan Africa (2017 / 169; WIDER Working Paper).
Adelowokan, O. A., Adesoye, B. A., Akpa, E. O., & Maku, O. E. (2019). Remittances , Foreign Aid and Private Consumption in Sub-Saharan Africa ( SSA ): A System GMM Estimation. KIU Journal of Social Sciences, 5(4), 67–76.
Ahmed, V., Sugiyarto, G., & Jha, S. (2010). Remittances and household welfare: A case study of Pakistan. In ADB Economics Working Paper Series (194). https://doi.org/10.2139/ssrn.1632200
Ajaero, C. K., Nzeadibe, C. T., Obisie-Nmehielle, N., & Ike, C. C. (2018). The linkages between international migration, remittances and household welfare in Nigeria. Migration and Development, 7(1), 40–54.
Akanle, O., & Adesina, J. O. (2017). Remittances and Household Welfare in Nigeria. African Population Studies, 31(1), 3194–3211.
Akhter, N., & Islam, M. K. (2019). The Impact of Migration and Migrant Remittances on Household Poverty in Bangladesh. Asian Development Perspectives, 10(1), 43–59.
Akpa, E. O. (2018). Private Remittances Received and Household Consumption in Ghana ( 1980- 2016 ): An ARDL Analysis with Structural Breaks. International Journal of Management and Economics Invention, 04(05), 1771–1777.
Al Akayleh, F. (2016). Do Foreign Workers’ Positive Contributions to GDP Outweigh the Negative Effect of Their Outward Remittances on GDP? A Case Study of Saudi Arabia. Advances in Economics and Business, 4(12), 657–666.
Arapi-gjini, A., Möllers, J., & Herzfeld, T. (2020). Measuring Dynamic Effects of Remittances on Poverty and Inequality with Evidence from Kosovo. Eastern European Economics, 1–26.
Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Review of Economic Studies, 58(2), 277–297.
Arellano, M., & Bover, O. (1995). Another Look at the Instrumental Variable Estimation of Error-Components Models. Journal of Econometrics, 68, 29–51.
Asongu, S. A., & le Roux, S. (2018). Understanding Sub-Saharan Africa’s Extreme Poverty Tragedy (WP/18/012; A G D I Working Paper, Issue WP/18/012).
Assaminew, E., Ahmed, G., Aberra, K., & Makonnen, T. (2011). International Migration, Remittances and Poverty Alleviation in Ethiopia. Ethiopian Journal of Development Research, 33(1).
Awan, M. S., Javed, M., & Waqas, M. (2015). Migration, Remittances, and Household Welfare: Evidence from Pakistan. The Lahore Journal of Economics, 20(1), 47–69.
Azam, M., Haseeb, M., & Samsudin, S. (2016). The impact of foreign remittances on poverty alleviation: Global evidence. Economics and Sociology, 9(1), 264–281.
Bahadir, B., Chatterjee, S., & Lebesmuehlbacher, T. (2018). The macroeconomic consequences of remittances. Journal of International Economics.
Biyase, M., & Zwane, T. (2017). An Empirical Analysis of the Determinants of Poverty and Household Welfare in South Africa. MPRA Paper, 77085, 1–19.
Blundell, R., & Bond, S. (1998). Initial Conditions and Moment Restrictions in Dynamic Panel Data Models. Journal of Econometrics, 87, 115–143.
Bond, S. R. (2002). Dynamic Panel Data Models: a Guide to Micro Data Methods and Practice. Portuguese Economic Journal, 1, 141–162.
Butkus, M., Matuzevičiūtė, K., & Raupytė, K. (2020). Effects of Remittances on Poverty : Evidence in CEE Countries. Organizations and Markets in Emerging Economies, 11(1), 69–82.
Cardozo, A. R., Nowak-Lehmann, F., & Djiofack, C. Z. (2019). Migration and remittances in Haiti: Their welfare impact on poor and non-poor households. Georg-August-Universität Göttingen, Ibero-America Institute for Economic Research Discussion Papers, 244, 1–28.
Chenery, H. B., & Strout, A. M. (1966). Foreign Assistance and Economic Development. The American Economic Review, 56(4), 679–733.
Cuong, N., & Linh, V. (2017). The Impact of Migration and Remittance on Household Welfare: Evidence from Vietnam. Munich Personal RePEc Archive, 1–30.
Evans, O., & Kelikume, I. (2018). The Effects of Foreign Direct Investment, Trade, Aid, Remittances and Tourism on Welfare under Terrorism and Militancy. International Journal of Management, Economics and Social Sciences, 7(3), 206–232.
Ewubare, D., & Okpoi, G. E. (2018). International Remittances and Poverty Reduction in Nigeria. Journal of Applied Economics and Business, 6(2), 5–24.
Grell-Brisk, M. (2019). Arrested development? Sub-Saharan Africa in the stratified world economy 1965–2015. Journal of Contemporary African Studies.
Iheonu, C. O., & Nwachukwu, T. (2020). Macroeconomic determinants of Household Consumption in selected West African countries (WP/20/031; AGDI Working Paper).
Imai, K. S., Malaeb, B., & Bresciani, F. (2017). Remittances, growth and poverty reduction in Asia. IFAD RESEARCH SERIES 15, 1–47.
Imran, K., Devadason, E. S., & Cheok, C. K. (2019). Foreign Remittances and Regional Poverty : Evidence from Household Data. International Migration, 1–17.
Javed, M., Awan, M. S., & Waqas, M. (2015). International Migration, Remittances Inflow and Household Welfare: An Intra Village Comparison from Pakistan. Social Indicators Research.
Javid, M., Arif, U., & Qayyum, A. (2012). Impact of remittances on economic growth and poverty. Post-Communist Economies, 2(1), 433–447.
Kangmennaang, J., Bezner-Kerr, R., & Luginaah, I. (2018). Impact of migration and remittances on household welfare among rural households in Northern and Central Malawi. Migration and Development, 7(1), 55–71.
Koc, I., & Onan, I. (2004). International Mi’ants’ Remittances and WeGfare StatuS of the Lefi-Behind Families in Tbkey. International Migrants’ Remittances, 38(1), 78–112.
Kumar, B. (2019a). Remittances, Poverty and Welfare: Evidence from Cumilla, Bangladesh. American Journal of Data Mining and Knowledge Discovery, 4(1), 46–52.
Kumar, B. (2019b). The Impact of International Remittances on Poverty Alleviation. Remittances Review, 4(1), 67–86.
Marta, J., Fauzi, A., Juanda, B., & Rustiadi, E. (2020). Regional Studies , Regional Science Understanding migration motives and its impact on household welfare: evidence from rural – urban migration in Indonesia. Regional Studies, Regional Science, 7(1), 118–132.
Mashayekhi, N., Zhang, L., & Eugui, D. V. (2013). Maxamizing the development impact of remittance. United Nations Conference on Trade and Development, 181.
Munyegera, G. K., & Matsumoto, T. (2016). Mobile Money, Remittances, and Household Welfare: Panel Evidence from Rural Uganda. World Development, 79, 127–137.
Nwaru, J. C., Iheke, O. R., & Onyenweaku, C. E. (2011). Impact of Migrant Remittances on the Welfare of Arable Crop Farm Households in South Eastern Nigeria. Human Ecology Review, 18(2), 159–166.
Okwu, A. T., Akpa, E. O., Oseni, I. O., & Obiakor, R. T. (2020). Oil Export Revenue and Exchange Rate: An Investigation of Asymmetric Effects on Households’ Consumption Expenditure in Nigeria. Babcock Journal OfEconomics (BJOE), 7(E/June), 13–28.
Olubusoye, E.O., Salisu, A.A and Olofin, S.O. (2016). Applied Panel Data Analysis. Ibadan: University Press, Ibadan
Quartey, P. (2006). The impact of migrant remittances on household welfare in Ghana. In African Economic Research Consortium (AERC) Paper 158.
Salman, K. K. (2016). Have Migrant Remittances Influenced Self-Employment and Welfare among Recipient Households in Nigeria ? (No. 0030; AGRODEP Working Paper, Issue July).
Samaratunge, R., Kumara, A. S., & Abeysekera, L. (2020). Where do Remittances Go in Household Consumption ? Empirical Evidence from Sri Lanka-Wide Micro-data. International Migration, 1–26.
Sulemana, I., Anarfo, E. B., & Quartey, P. (2018). International remittances and household food security in Sub-Saharan Africa International remittances and household food security in Sub-Saharan Africa. Migration and Development, 1–17.
Sulemana, I., Louis, D., & Anarfo, E. B. (2019). International Remittances and Subjective Wellbeing in Sub-Saharan Africa : A Micro-level Study. Journal of Family and Economic Issues,
Viet, C. N. (2008). Do foreign remittances matter to poverty and inequality? Evidence from Vietnam. Economics Bulletin, 15(1), 1–11.
Wadood, S. N., & Hossain, A. (2017). Microeconomic impact of remittances on household welfare: Evidences from Bangladesh. Business and Economic Horizons, 13(1), 10–29.
World Bank (2013). The Global Burden of Disease: main Findings for Sub-Saharan Africa. Retrieved from https://www.worldbank.org/en/region/afr/publication/global-burden-of-disease-findings-for-sub-saharan-africa, date: 05.01.2021
World Development Indicators (WDI). (2020). Data Bank. Retrieved from https://databank.worldbank.org/source/world-development-indicators, date: 05.01.2021
World Bank. (2018). Migration and Remittances: Recent Developments and Outlook”, Migration and Policy Brief, 29
World Bank.. (2019). Migration and Remittances: Recent Developments and Outlook, Migration and Policy Brief, 31
Wouterse, F. (2010). Remittances, poverty, inequality and welfare: Evidence from the central plateauof Burkina Faso. Journal of Development Studies, 46(4), 771–789.
Abduvaliev, M., & Bustillo, R. (2019). Impact of remittances on economic growth and poverty reduction amongst CIS countries. Post-Communist Economies, 1–22.
Addison, T., Pikkarainen, V., Rönkkö, R., & Tarp, F. (2017). Development and Poverty in sub-Saharan Africa (2017 / 169; WIDER Working Paper).
Adelowokan, O. A., Adesoye, B. A., Akpa, E. O., & Maku, O. E. (2019). Remittances , Foreign Aid and Private Consumption in Sub-Saharan Africa ( SSA ): A System GMM Estimation. KIU Journal of Social Sciences, 5(4), 67–76.
Ahmed, V., Sugiyarto, G., & Jha, S. (2010). Remittances and household welfare: A case study of Pakistan. In ADB Economics Working Paper Series (194). https://doi.org/10.2139/ssrn.1632200
Ajaero, C. K., Nzeadibe, C. T., Obisie-Nmehielle, N., & Ike, C. C. (2018). The linkages between international migration, remittances and household welfare in Nigeria. Migration and Development, 7(1), 40–54.
Akanle, O., & Adesina, J. O. (2017). Remittances and Household Welfare in Nigeria. African Population Studies, 31(1), 3194–3211.
Akhter, N., & Islam, M. K. (2019). The Impact of Migration and Migrant Remittances on Household Poverty in Bangladesh. Asian Development Perspectives, 10(1), 43–59.
Akpa, E. O. (2018). Private Remittances Received and Household Consumption in Ghana ( 1980- 2016 ): An ARDL Analysis with Structural Breaks. International Journal of Management and Economics Invention, 04(05), 1771–1777.
Al Akayleh, F. (2016). Do Foreign Workers’ Positive Contributions to GDP Outweigh the Negative Effect of Their Outward Remittances on GDP? A Case Study of Saudi Arabia. Advances in Economics and Business, 4(12), 657–666.
Arapi-gjini, A., Möllers, J., & Herzfeld, T. (2020). Measuring Dynamic Effects of Remittances on Poverty and Inequality with Evidence from Kosovo. Eastern European Economics, 1–26.
Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Review of Economic Studies, 58(2), 277–297.
Arellano, M., & Bover, O. (1995). Another Look at the Instrumental Variable Estimation of Error-Components Models. Journal of Econometrics, 68, 29–51.
Asongu, S. A., & le Roux, S. (2018). Understanding Sub-Saharan Africa’s Extreme Poverty Tragedy (WP/18/012; A G D I Working Paper, Issue WP/18/012).
Assaminew, E., Ahmed, G., Aberra, K., & Makonnen, T. (2011). International Migration, Remittances and Poverty Alleviation in Ethiopia. Ethiopian Journal of Development Research, 33(1).
Awan, M. S., Javed, M., & Waqas, M. (2015). Migration, Remittances, and Household Welfare: Evidence from Pakistan. The Lahore Journal of Economics, 20(1), 47–69.
Azam, M., Haseeb, M., & Samsudin, S. (2016). The impact of foreign remittances on poverty alleviation: Global evidence. Economics and Sociology, 9(1), 264–281.
Bahadir, B., Chatterjee, S., & Lebesmuehlbacher, T. (2018). The macroeconomic consequences of remittances. Journal of International Economics.
Biyase, M., & Zwane, T. (2017). An Empirical Analysis of the Determinants of Poverty and Household Welfare in South Africa. MPRA Paper, 77085, 1–19.
Blundell, R., & Bond, S. (1998). Initial Conditions and Moment Restrictions in Dynamic Panel Data Models. Journal of Econometrics, 87, 115–143.
Bond, S. R. (2002). Dynamic Panel Data Models: a Guide to Micro Data Methods and Practice. Portuguese Economic Journal, 1, 141–162.
Butkus, M., Matuzevičiūtė, K., & Raupytė, K. (2020). Effects of Remittances on Poverty : Evidence in CEE Countries. Organizations and Markets in Emerging Economies, 11(1), 69–82.
Cardozo, A. R., Nowak-Lehmann, F., & Djiofack, C. Z. (2019). Migration and remittances in Haiti: Their welfare impact on poor and non-poor households. Georg-August-Universität Göttingen, Ibero-America Institute for Economic Research Discussion Papers, 244, 1–28.
Chenery, H. B., & Strout, A. M. (1966). Foreign Assistance and Economic Development. The American Economic Review, 56(4), 679–733.
Cuong, N., & Linh, V. (2017). The Impact of Migration and Remittance on Household Welfare: Evidence from Vietnam. Munich Personal RePEc Archive, 1–30.
Evans, O., & Kelikume, I. (2018). The Effects of Foreign Direct Investment, Trade, Aid, Remittances and Tourism on Welfare under Terrorism and Militancy. International Journal of Management, Economics and Social Sciences, 7(3), 206–232.
Ewubare, D., & Okpoi, G. E. (2018). International Remittances and Poverty Reduction in Nigeria. Journal of Applied Economics and Business, 6(2), 5–24.
Grell-Brisk, M. (2019). Arrested development? Sub-Saharan Africa in the stratified world economy 1965–2015. Journal of Contemporary African Studies.
Iheonu, C. O., & Nwachukwu, T. (2020). Macroeconomic determinants of Household Consumption in selected West African countries (WP/20/031; AGDI Working Paper).
Imai, K. S., Malaeb, B., & Bresciani, F. (2017). Remittances, growth and poverty reduction in Asia. IFAD RESEARCH SERIES 15, 1–47.
Imran, K., Devadason, E. S., & Cheok, C. K. (2019). Foreign Remittances and Regional Poverty : Evidence from Household Data. International Migration, 1–17.
Javed, M., Awan, M. S., & Waqas, M. (2015). International Migration, Remittances Inflow and Household Welfare: An Intra Village Comparison from Pakistan. Social Indicators Research.
Javid, M., Arif, U., & Qayyum, A. (2012). Impact of remittances on economic growth and poverty. Post-Communist Economies, 2(1), 433–447.
Kangmennaang, J., Bezner-Kerr, R., & Luginaah, I. (2018). Impact of migration and remittances on household welfare among rural households in Northern and Central Malawi. Migration and Development, 7(1), 55–71.
Koc, I., & Onan, I. (2004). International Mi’ants’ Remittances and WeGfare StatuS of the Lefi-Behind Families in Tbkey. International Migrants’ Remittances, 38(1), 78–112.
Kumar, B. (2019a). Remittances, Poverty and Welfare: Evidence from Cumilla, Bangladesh. American Journal of Data Mining and Knowledge Discovery, 4(1), 46–52.
Kumar, B. (2019b). The Impact of International Remittances on Poverty Alleviation. Remittances Review, 4(1), 67–86.
Marta, J., Fauzi, A., Juanda, B., & Rustiadi, E. (2020). Regional Studies , Regional Science Understanding migration motives and its impact on household welfare: evidence from rural – urban migration in Indonesia. Regional Studies, Regional Science, 7(1), 118–132.
Mashayekhi, N., Zhang, L., & Eugui, D. V. (2013). Maxamizing the development impact of remittance. United Nations Conference on Trade and Development, 181.
Munyegera, G. K., & Matsumoto, T. (2016). Mobile Money, Remittances, and Household Welfare: Panel Evidence from Rural Uganda. World Development, 79, 127–137.
Nwaru, J. C., Iheke, O. R., & Onyenweaku, C. E. (2011). Impact of Migrant Remittances on the Welfare of Arable Crop Farm Households in South Eastern Nigeria. Human Ecology Review, 18(2), 159–166.
Okwu, A. T., Akpa, E. O., Oseni, I. O., & Obiakor, R. T. (2020). Oil Export Revenue and Exchange Rate: An Investigation of Asymmetric Effects on Households’ Consumption Expenditure in Nigeria. Babcock Journal OfEconomics (BJOE), 7(E/June), 13–28.
Olubusoye, E.O., Salisu, A.A and Olofin, S.O. (2016). Applied Panel Data Analysis. Ibadan: University Press, Ibadan
Quartey, P. (2006). The impact of migrant remittances on household welfare in Ghana. In African Economic Research Consortium (AERC) Paper 158.
Salman, K. K. (2016). Have Migrant Remittances Influenced Self-Employment and Welfare among Recipient Households in Nigeria ? (No. 0030; AGRODEP Working Paper, Issue July).
Samaratunge, R., Kumara, A. S., & Abeysekera, L. (2020). Where do Remittances Go in Household Consumption ? Empirical Evidence from Sri Lanka-Wide Micro-data. International Migration, 1–26.
Sulemana, I., Anarfo, E. B., & Quartey, P. (2018). International remittances and household food security in Sub-Saharan Africa International remittances and household food security in Sub-Saharan Africa. Migration and Development, 1–17.
Sulemana, I., Louis, D., & Anarfo, E. B. (2019). International Remittances and Subjective Wellbeing in Sub-Saharan Africa : A Micro-level Study. Journal of Family and Economic Issues,
Viet, C. N. (2008). Do foreign remittances matter to poverty and inequality? Evidence from Vietnam. Economics Bulletin, 15(1), 1–11.
Wadood, S. N., & Hossain, A. (2017). Microeconomic impact of remittances on household welfare: Evidences from Bangladesh. Business and Economic Horizons, 13(1), 10–29.
World Bank (2013). The Global Burden of Disease: main Findings for Sub-Saharan Africa. Retrieved from https://www.worldbank.org/en/region/afr/publication/global-burden-of-disease-findings-for-sub-saharan-africa, date: 05.01.2021
World Development Indicators (WDI). (2020). Data Bank. Retrieved from https://databank.worldbank.org/source/world-development-indicators, date: 05.01.2021
World Bank. (2018). Migration and Remittances: Recent Developments and Outlook”, Migration and Policy Brief, 29
World Bank.. (2019). Migration and Remittances: Recent Developments and Outlook, Migration and Policy Brief, 31
Wouterse, F. (2010). Remittances, poverty, inequality and welfare: Evidence from the central plateauof Burkina Faso. Journal of Development Studies, 46(4), 771–789.
Published
2021-02-10
How to Cite
Obiakor, R. T. ., Akpa, E., & Okwu, A. T. . (2021). The Effect of Inward and Outward Remittances on Welfare in Africa: Array. Acta Universitatis Danubius. Œconomica, 17(2). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/782
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Business Administration and Business Economics
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