International Migration, Remittances and Poverty Alleviation in Ethiopia

Abstract

The article explores the impact of international remittances on the Ethiopian
economy as well as the livelihoods and welfare of households. A simple dynamic
ecollometric model, Vector Autoregressive (YAR) model, was used 10 assess the
impact of internaJionai remittances on absorption, spending and output. Moreover.
we used binary outcome model 10 tesl whether remittances have an impact on the
welfare of households. Besides, the study made use of macroeconomic data and
dOlO from the Ethiopian urban household survey. It was found that remittance
shocks positively affect macroeconomic variables; the effect remained to be
volatile in the very first periods after the shock. However, the impacts tend to
Sustain in the years after the fifth period. Moreover, through the positive (but
inelastic) relationship between growth and poverty, private remirrance inflows
have an important implication for poverty in Ethiopia. Interna!ional remittances
significantly reduced the poverty incidence amollg the urban households in the
country. It was also found that female -headed households are more likely to lise
remirrance more effectively than male-headed households are.