How foreign aid and remittances affect poverty in MENA countries?

Abstract

Foreign aid and remittances augment the income of economies. The present study examines the relationship between economic growth, poverty, inequality, remittances, and foreign aid in the Middle East and North Africa (MENA) countries using panel data methods from 1991 to 2019. The study focuses on the MENA region due to the rise in labor immigration and significant foreign aid. The empirical findings reveal that remittances, foreign aid, and economic growth play a significant role in bringing down the MENA region’s poverty levels. Besides, a rise in income share accruing to the lowest quintile is observed despite the negative income growth, which indicates that on average, the income increased more rapidly of the poor in comparison to the non-poor households. Thus, the study finds evidence supporting the hypothesis that remittances and foreign aid augment per capita income and income share in the MENA member countries.