From Buffer to Catalysts: When Financial Institutions Unlock the Long-Run Poverty-Reducing Power of Remittances

Hany Navarra ()
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Hany Navarra: Saitama University, Saitama, Japan

RAIS Conference Proceedings 2022-2025 from Research Association for Interdisciplinary Studies

Abstract: Remittances, the money migrant workers send to their origin country, are now a dominant external finance source for many developing countries, often surpassing official aid and foreign direct investment inflows. While widely recognized for supporting household consumption, their role in longterm poverty reduction remains contested. This study explores whether remittances only become developmentally effective under specific financial institutional conditions. Grounded in theories of absorptive capacity and institutional complementarity, it applies a dynamic panel threshold model to test whether financial system depth conditions the poverty-reducing impact of remittance inflows. Using panel data from 96 developing countries covering the period 2002 to 2021, the analysis identifies distinct regimes of remittance effectiveness. The findings offer a structural explanation for cross-country differences in remittance outcomes and provide new insight into how financial maturity shapes the developmental role of migrant transfers. Implications are drawn for SDGs related to poverty, financial access, and remittance cost reduction.

Keywords: remittances; poverty; financial development; institutional threshold; SDGs; panel data (search for similar items in EconPapers)
Pages: 10 pages
Date: 2025-08
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Published in Proceedings of the 41st International RAIS Conference on Social Sciences and Humanities, August 7-8, 2025, pages 97-106

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Persistent link: https://EconPapers.repec.org/RePEc:smo:raiswp:0562

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