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2009 AEC- Remittances and Poverty Reduction Evidence from Ghana

10-Nov-2009

This paper investigates the effects of international remittances on poverty incidence and severity in Ghana. Using both cross section data from Ghana Living Standards Survey wave 5 (GLSS5) and pseudo-panel data constructed from GLSS3-GLSS5 and a GMM pseudo-panel estimator, we find that international remittances decreases the probability of a family being poor or chronically poor. The effect of international remittances in reducing poverty is far higher than the effect of domestic remittances in reducing poverty. We also find that remittances increases the number of children in a family that attend school, suggesting that international remittances increase human capital formation. We interpret this to mean that international remittances also decreases poverty in the long run. Our results are robust to the measurement of “poverty”, sample, and estimation methodology. Our results have important policy implications.

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