The multiple impact of remittances on poverty in developing countries: Direct effects and through human capital

Abstract

This paper assesses the impacts of remittances on poverty for 130 developing countries for the period 1990–2019. It finds that remittances decrease poverty through their direct effect and increase human capital which enhances the total effects of remittances on poverty. A 10 % increase in per capita remittances decreases the poverty level by 1.3 %, poverty depth by 2 %, and poverty severity by 3.12 %. In addition, human capital decreases poverty level, depth, and severity. This supports the notion that developing countries should adopt policies that lower remittance costs and promote education to increase the impacts of remittances on poverty.