Exploratory Research 2012

The impact of remittances on economic growth, poverty and income inequality in Armenia

Gagik Galstyan’s main goals for his paper were to demonstrate the positive and negative effects of remittances on issues such as long run GDP, poverty reduction, income inequality, etc. The author hypothesized whether the inflow of remittances affects income inequality (H1) and whether remittances harm current account (H2). In order to test the hypotheses the author applied several household and migrant survey databases, provided by the CRRC, International Labour Organization (ILO), the Central Bank of Armenia (CBA), National Statistical Service (NSS) and others. Regression analysis was performed using those databases. This paper’s main results are that there is positive correlation between remittances and GDP growth, but in the long run remittances affect the GDP growth negatively. The author explained this phenomenon applying to concepts like moral hazard problem, brain drain or Dutch dicease. Testing the hypotheses H1 the author demonstrates that remittances positively influence Gini coefficient, which means that H1 is accepted. The author also discovered that remittances negatively influence Export, thus H2 is accepted as well.