Measuring the effect of bi-directional migration remittances on poverty and inequality in Nicaragua

Andrew W. Hobbs and Kenneth Jameson

Applied Economics, 2012, vol. 44, issue 19, 2451-2460

Abstract: This article examines the impact of migrants’ remittances on poverty and income distribution in Nicaragua. Nicaraguan emigrants are fairly evenly distributed between the US and Costa Rica. Poorer migrants overwhelmingly migrate to Costa Rica; richer migrants favour the US. This bi-directional flow provides an opportunity to examine the distributional impacts of remittances in a situation that offers distinct opportunities to different groups of prospective migrants. To this end, we use Heckman's (1979) sample selection method to predict counterfactual ‘no-migration’ consumption figures for Nicaraguan households whose members have emigrated. Using these estimates, we are able to compare the current situation to one in which migration had not occurred. We find that migration to Costa Rica results in increased per capita household consumption for poor households, while migration to the US leads to increase in middle class households. The rate, depth and severity of poverty as measured by the Foster, Greer, Thorbecke Indices (Foster et al ., 1984) decrease, though only slightly. However, inequality appears to increase, likely because the middle class benefits from US migration, while the poor tend to make it no farther than Costa Rica.

Date: 2012
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DOI: 10.1080/00036846.2011.564153

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