Remittances and Inequality: The Post-Communist Region

Abstract

This study aims to investigate the impact of international remittances on income inequality in the post-communist region. The association between the variables is examined via static and dynamic panel models. Using macroeconomic data from 27 countries over the period 1991-2014, we discover that income inequality progresses along a U-shaped course as a country becomes more dependent on remittances. For most of the countries, the relationship between remittances and inequality is inverse. When remittances account for more than 20% of GDP, they exacerbate economic inequality. This finding challenges the view that remittances should only be viewed as a pro-poor redistribution mechanism because in certain cases, additional migrant transfers may actually increase income inequality.