Hollowing Out the Middle? Remittances and Income Inequality in Nigeria

19 Pages Posted: 12 Apr 2018

See all articles by James T. Bang

James T. Bang

Saint Ambrose University - Department of Finance, Economics & Decision Sc.

Aniruddha Mitra

Bard College

Phani V. Wunnava

Middlebury College; Institute for the Study of Labor (IZA)

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.

Keywords: poverty, income inequality, migration, remittances, instrumental variable, quantile regression

JEL Classification: F22, F24, O15, O55

Suggested Citation

Bang, James T. and Mitra, Aniruddha and Wunnava, Phani V., Hollowing Out the Middle? Remittances and Income Inequality in Nigeria. IZA Discussion Paper No. 11438, Available at SSRN: https://ssrn.com/abstract=3158144 or http://dx.doi.org/10.2139/ssrn.3158144

James T. Bang (Contact Author)

Saint Ambrose University - Department of Finance, Economics & Decision Sc. ( email )

518 West Locust Street
Davenport, IA 52803
United States

Aniruddha Mitra

Bard College ( email )

Phani V. Wunnava

Middlebury College ( email )

Middlebury, VT 05753
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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