Why Migrants' Remittances Reduce Income Inequality in some Countries and not in Others?

Christian Hubert Ebeke (1) , Maëlan Le Goff (1)

1 CERDI - Centre d'Études et de Recherches sur le Développement International

According to the literature, the effect of remittances on income inequality in origin countries of migrants is not clear, whatever empirical approach is used. Aiming at clearing up this ambiguity, some authors took into account the historical, social or economic context of the home countries considered. The underlying idea of most of these studies is actually that the impact of remittances on income inequality depends on whom migrates, i.e. on the location migrants occupy in income distribution in their home country. However, to our knowledge, no macroeconomic study examining the remittances effect on inequality, consider the composition of migratory flows. To reveal at the macroeconomic level the position of migrants in income distribution at origin, we introduce in our equation of inequality non-linearities in the level of development of the recipient countries, in the costs of migration and in the level of brain drain. Using a panel sample of 80 developing countries over the period 1970-2000, and even by factoring in the endogeneity of remittances, this paper provides evidence of some characteristics of countries of origin in which there is an inequality-decreasing effect of remittances on income inequality. It turns out that countries belonging to the Mediterranean Basin have the characteristics revealed.

Keywords: Migrants' remittances; Income; migration costs; Brain drain; income inequality; instrumental variables; Mediterranean basin

Domains: Economics and Finance

Christian Hubert Ebeke, Maëlan Le Goff. Why Migrants' Remittances Reduce Income Inequality in some Countries and not in Others?. 2011. ⟨halshs-00554277⟩