The Impact of International Remittances on Poverty: Evidence From The Southern and Eastern Mediterranean Countries

Abstract

Workers Remittances represent an important source of financing for recipient countries to the extent that it exceeds sometimes foreign direct investment (FDI) flows (Sirkeci, Ratha, Cohen, 2012). International remittances flowing into developing economies has gained an increasing importance regarding the volume of these flows, their importance for the financial sector as well as their overall impact at the economic and social levels. Based upon a review of theoretical and empirical literature, this paper uses an econometric model based on the basic growth poverty model suggested by (Ravallion, 1997) and (Ravallion & Chen, 1997) accompanied by the frameworks postulated by (Adams & Page, 2005) to assess the impact of remittances in terms of reducing the level of poverty.  It is based on panel data of eight Southern and Eastern Mediterranean countries (SEMEC) (Algeria, Egypt, Jordan, Lebanon, Morocco, Tunisia, Turkey and West bank and Gaza)  over the period 2000-2018. In most of these countries, remittances represent the largest foreign exchange earnings and represent an average of 8% of GDP. The results suggest that remittances have a positive impact on growth and therefore contribute through income to poverty reduction. This impact becomes significant as the level of remittances relative to GDP increases.