The Effects of Remittances on Population's Income Share

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2022-04-14

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Abstract

Using a balanced panel covering from 1980 to 2019 for 12 Latinamerican countries and a fixed-effects econometric estimator, we explore the impact of remittances (personal international money transfers) on the population's income shares at four distribution levels. Our findings show that remittances slightly increase the income share of the bottom 50 and middle 40 percent of the population. At the top 1 and 10 percent of the population, remittances decrease the income share of such groups, which is consistent with previous literature. All else being the same, remittances are progressive since they positively impact the poor and negatively relate to the rich. However, the magnitude of our coefficients is small and statistically insignificant in some cases. A 1 percentage point increase in remittances as a share of GDP would increase the income share of the population's bottom 50 percent by 0.001 percentage points. On the other hand, a one percentage point increase in remittances as a share of GDP would decrease the income share of the population's top 1 percent by 0.003 of a percentage point.

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