This paper uses nationally-representative household surveys from 10 Latin American countries to examine the effect of international remittances on poverty and inequality. The authors find that simple OLS regressions show that remittances have no statistical effect on poverty in Latin America. However, since these results may suffer from endogeneity bias, the authors re-estimate the regressions using an IV approach. Using this new approach, the authors find that remittances have reduced the poverty headcount in Latin America by about 0.4 percent for each percentage increase in the remittances to GDP ratio. On inequality, they find that remittances have only a small impact on income inequality in Latin America.
©2006 Wiley. Reproduced with permission of Blackwell Publishing Ltd