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Do remittances improve income inequality? An instrumental variable quantile analysis of the Kenyan case

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  • Bang, James T.
  • Mitra, Aniruddha
  • Wunnava, Phanindra V.
Abstract
The impact of remittances on income inequality constitutes a keenly debated topic in the development literature. Yet, a consensus still has not evolved on the issue. This paper explores the argument that the adverse distributional impact of remittances obtained by a number of studies could partially be due to the failure to control for existing differentials in the ability to migrate. We test the impact of remittances on household expenditures using data from the Kenyan Migration Household Survey and employing an instrumental variable quantile regression model to control for the unequal access to migration of rich and poor households. Our results indicate that while remittances increase household expenditure at all levels of the expenditure distribution, the impact is unambiguously greatest for poorer households. Hence, remittances, in and of themselves, improve both poverty and the distribution of income. This suggests that if remittances are to provide an impetus to development, recipient economies need to alleviate the credit constraints that restrict access to migration for the poor and the ability to send money home once the access bar has been overcome.

Suggested Citation

  • Bang, James T. & Mitra, Aniruddha & Wunnava, Phanindra V., 2016. "Do remittances improve income inequality? An instrumental variable quantile analysis of the Kenyan case," Economic Modelling, Elsevier, vol. 58(C), pages 394-402.
    • Handle: RePEc:eee:ecmode:v:58:y:2016:i:c:p:394-402
    DOI: 10.1016/j.econmod.2016.04.004
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    References listed on IDEAS

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    1. Richard C. Jones, 1998. "Remittances and Inequality: A Question of Migration Stage and Geographic Scale," Economic Geography, Taylor & Francis Journals, vol. 74(1), pages 8-25, January.
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    3. John Anyanwu & Andrew E. O. Erhijakpor, 2010. "Do International Remittances Affect Poverty in Africa?," African Development Review, African Development Bank, vol. 22(1), pages 51-91.
    4. Adams, Richard H., Jr. & Cuecuecha, Alfredo & Page, John, 2008. "The impact of remittances on poverty and inequality in Ghana," Policy Research Working Paper Series 4732, The World Bank.
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    8. J. Taylor & T.J. Wyatt, 1996. "The shadow value of migrant remittances, income and inequality in a household‐farm economy," Journal of Development Studies, Taylor & Francis Journals, vol. 32(6), pages 899-912.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Poverty; Income inequality; Migration; Remittances;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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