Effects of remittances on income inequality in Sub-Saharan Africa

Abstract

Abstract This research aimed to analyze the effect of migrant remittances on income inequality in SSA through their effect on different income groups. Thus, the fixed effects method was applied using the standard Driscoll-Kraay errors on a panel of 34 SSA countries over the period from 2005 to 2019. As a main result, this research shows that remittances received in SSA countries contribute to reducing income inequalities in these countries. This reduction in inequality is reflected in a reduction in the income share held by the richest 10% of the population on the one hand, and an increase in the income share of the poorest 90% of the population on the other. The results nevertheless suggest that the observed increase in the income share of the latter is more important for the 40% of the population above the 50% least wealthy. The results are robust to the use of the two-stage system generalized method of moments. In terms of economic policies, these results suggest facilitating remittances reaching this region by encouraging, for example, bi-banking and the development of mobile remittance facilities.