The Impact of International Remittances and Other Determinants on Poverty: Evidence from Selected Post – Soviet Countries

Abstract

The present study uses empirical analysis to examine the impact of international remittances and other variables (human capital development, savings, trade openness, and GDP per capita) on the level of poverty in 11 post-soviet countries; four remaining republics were dropped due to the lack of data. The panel data analysis covers the period of 2004-2016 and the method of IV Two-Stage Least Squares (IV 2SLS) estimation. The IV 2SLS estimates revealed that there is a positive relationship between international remittances and poverty, meaning that a percentage increase in the received remittances leads to an increase in poverty. Though the coefficient of increase is marginal it is still statistically significant at 1%. From the control variables, trade openness and savings are found to have a poverty decreasing effect in former Soviet countries. However, despite the positive relationship between poverty and remittances, the role of these external financial means should not be underestimated in the receiving countries and they should be managed efficiently with the purpose of benefitting people and economy of the country