Remittances, Inequality and Poverty: Evidence from Rural Mexico

This paper explores the impact of migration and remittances on the distribution of rural income and rural poverty. It uses Gini and poverty decomposition techniques and data from the 2003 Mexico National Rural Household Survey. It analyzes distributional and poverty effects of migrant remittances in regions with differing levels of migration prevalence. The paper posits that in the case of international migration, impacts of remittances are more equalizing and have a larger effect on alleviating poverty as the share of households with access to remittances increases. Findings indicate that:

• Despite their positive effect on inequality, international migrant remittances reduce rural poverty by a greater amount than internal remittances;
• Ameliorative effect of remittances on poverty increases as economies become more integrated with migrant labor markets. 

These findings have a number of policy implications. Policies that restrict migration increase poverty, especially in regions where there is high prevalence of household participation in migration. Measures that promote remittances can be an effective poverty reduction tool. The impact of such measures would appear to be most favorable in regions with the highest migration.