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Hollowing Out the Middle? Remittances and Income Inequality in Nigeria

Author

Listed:
  • Bang, James T.

    (St. Ambrose University)

  • Mitra, Aniruddha

    (Bard College)

  • Wunnava, Phanindra V.

    (Middlebury College)

Abstract

This paper investigates the impact of remittances on poverty and inequality in Nigeria. In contrast to the existing literature, our methodology of instrumental variable quantile regression (IVQR) explicitly demonstrates the differential marginal impact of remittances for households at different levels of the conditional expenditure distribution. Furthermore, in tracing this heterogeneous impact, we are able to address the effect of remittances on poverty and inequality simultaneously in a unified econometric model. Our results reveal a positive marginal impact of remittances at all but the very highest quantiles of the conditional distribution of household expenditure, with the impact being the greatest up to the 12th quantile. While this unambiguously supports the poverty alleviation role of remittances hypothesized in the literature, the distributional impact is more nuanced: The marginal effect of remittance is seen to follow an approximate U-shape over the household expenditure distribution until the 89th quantile, whereupon it drops sharply. As such, households lying between the 13th to the 35th quantile gain far less from receiving remittances than households outside of this range.

Suggested Citation

  • Bang, James T. & Mitra, Aniruddha & Wunnava, Phanindra V., 2018. "Hollowing Out the Middle? Remittances and Income Inequality in Nigeria," IZA Discussion Papers 11438, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11438
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    References listed on IDEAS

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    1. Björn Nilsson & Racha Ramadan, 2020. "Migration and Inequalities Around the Mediterranean Sea," Working Papers 1390, Economic Research Forum, revised 20 Apr 2020.
    2. Kehinde, Ayodeji Damilola, 2021. "The Distributional Impact of Non-Farm Income on Output and Farm Income of Cassava Farmers in Southwestern Nigeria," 2021 Conference, August 17-31, 2021, Virtual 315857, International Association of Agricultural Economists.

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    More about this item

    Keywords

    instrumental variable; remittances; migration; income inequality; poverty; quantile regression;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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