E3 Journal of Business Management and Economics

E3 Journal of Business Management and Economics Vol. 3 (5) pp. 210-221, May 2012; © E3 Journals; ISSN 2141-7482

Remittances and income inequality in rural Nigeria

Abstract

The paper studies the effect of remittances on inequality in rural Nigeria using the Nigeria Living standard survey collected in 2004 by Nigeria Bureau of Statistics. This study decomposed income inequality in rural Nigeria using the Gini-decomposition and regression-based approaches to investigate the contribution of remittance to income inequality in Rural Nigeria. Results shows Domestic remittances seem more likely to be income equalizing than foreign remittances. Education is associated with lower domestic remittances and higher international remittances, probably reflecting the role of education in promoting international versus domestic migration. An increase in schooling increases inequality through domestic remittances and decreases inequality through international remittances, while a reduction in household size reduces inequality through both domestic and international remittances. This analysis highlights the importance of the distinction between domestic and international remittances as drivers of inequality as well as the importance of identifying and quantifying the determinants of remittances and their subsequent impact on inequality.

Keywords: Remittances; Income; Inequality; Rural Nigeria