Foreign Remittances and Regional Poverty: Evidence from Household Data

This study examines the association between foreign remittances and poverty (incidence and severity) in the Punjab province of Pakistan. Logit regression is used to deal with binary headcount ratio, while the instrumental variable approach is employed to avoid possible endogeneity. Household-based data, covering more than 40,000 household units in Punjab, are used for the empirical estimations. After controlling for several variables, such as the number of dependents of households, age, gender, and education of the household head, the results indicate that foreign remittances’ inflow reduces the incidence and severity of poverty in all three regions of the Punjab province, North Punjab, South Punjab and Central Punjab. The South Punjab, however, is found to be poorer based on headcount poverty and severity of poverty as compared to the other two regions.