Do International Remittances Promote Poverty Alleviation? Evidence from Low- and Middle-Income Countries

Our research estimates that international remittances have a positive effect on poverty alleviation. To test this hypothesis, we employ unbalanced panel data obtained from the World Development Indicators, IMF, and World Governance Indicators for 65 Low-and Middle-Income Countries from 2002 - 2016. Several other variables considered to support our analysis were also incorporated into the dataset. More specifically, this data set is divided into five parts, namely identity, dependent variable, independent variable, control variable, instrumental variable, and another variable for robustness check. Identity consists of t (time), ID (country name), and id (country code). The dependent variable consists of P0_1 (The percentage of the population who is living under 1.90 USD per day, measured by constant 2011 USD adjusted for PPP), P1_1 (The percentage of mean shortfall in income from 1.90 USD per day, measured by constant 2011 USD adjusted for PPP), and P1_3 (The percentage of mean shortfall in income from 3.20 USD per day, measured by constant 2011 USD adjusted for PPP). Our independent variable is R (Total remittance consisting of personal transfers and compensation of employees as a share of GDP). The control variables consist of log_IC (Income (GDP) per capita, measured by constant 2011 USD adjusted for PPP / transformed into logarithm), GN (Gini Index), and INF (Percentage change of consumer price index in annual average). The instrumental variables consist of TOP (Total import and export as a share of GDP) and log_EX (Local Currency Unit (LCU) per USD, transformed into logarithm). Another variable is POL (political stability absence of violence/terrorism).We used these variables to run the Two-Stage Least Square (2SLS) regression analysis in Stata.