Remittances and Poverty in El Salvador

Abstract: With larger income gaps and opportunities between rich and poor countries, world labour migration has increased, and so have remittances from international labour migrants. Since remittances are an important source of income for many developing countries of the world, there is a need for studies that address effects of remittances on the receiving economy. The objective of this thesis is to study the impacts of remittances on poverty in El Salvador, one of the major remittance receiving countries of the world. The study is mainly based on data from the national household surveys 1996-2003. It is found that remittances contribute significantly to lower the poverty levels in El Salvador. The benefits from remittances do not reach all poor households and do not seem to contribute to an equalized income distribution in the country. Therefore, encouraging the inflows of remittances need to be part of a broader long-term poverty reduction strategy since remittances alone will not be enough to eliminate poverty.