The Impact of Remittances on Income Inequality in Selected Developing Countries: A Panel Threshold Regression Approach (Bootstrap Simulations Method)

Document Type : Scientific paper

Authors

1 Assistant Prof., Department of Economics, Faculty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran.

2 Assistant Prof., Department of Economics, Faculty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran

3 M.A in Economics, Department of Economics, University of Kurdistan, Faculty of Humanities and Social Sciences, Sanandaj, Iran

Abstract

Given the importance of income inequality, which is one of the major problems of macroeconomics, especially in developing countries, and considering the direct impact of remittances on the income of recipient households, the purpose of this study is to investigate the effect of remittances on income inequality. In this regard, the panel threshold regression approach for selected developing countries in the period 2018-2000 using the bootstrap simulation method has been used to approximate the asymptotic distribution of test statistics in Stata software. Findings from estimating the non-threshold linear model showed that the relationship between remittances and income inequality is negative and statistically significant, so that increasing the amount of remittances reduces the income inequality by 0.12 units. On the other hand, estimating the threshold fixed effects model indicates the existence of a threshold of 8.43% for the inflation rate and different effects of remittances on income inequality in two different inflation regimes. Considering the threshold effect, in order to investigate the effects of remittances on income inequality, the results show that remittances before the inflation threshold (low inflation regime), remittances reduce income inequality, but after the threshold (High inflation regime) remittances had a negative effect on income inequality but were not statistically significant. Therefore, the existence of high inflation can neutralize the effect of remittances on income inequality in countries with inflation above the threshold. Also, according to the results of the present study, the economic growth variable has reduced income inequality, but the variables of government size, trade openness, population growth rate and unemployment rate have increased income inequality.

Keywords

References

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Macroeconomics Research Letter
Volume 16, Issue 31
August 2021
Pages 125-153

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History

  • Receive Date: 27 September 2021
  • Revise Date: 11 November 2021
  • Accept Date: 20 November 2021

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