Correlates of poverty in Africa: Exploring the roles of remittances, financial development, and natural resources

Abstract

Purpose

The purpose of this paper is to examine how remittances, financial development (FD), and natural resources and their different transmission channels can be used to reduce poverty in Africa.

Design/methodology/approach

Using the Human Development Index (HDI) as the measure of welfare, the authors specify these relationships using the System GMM estimator approach.

Findings

The authors hypothesise that for remittance to effectively improve welfare, the recipient of remittances must have access to credit to profitably utilise the monies. Again, the authors assert that FD can be effective in improving welfare when development of the sector actually benefits the poor. The authors provide empirical support for these hypotheses using 54 African countries covering the period 1990-2012. The findings also show that the North African region has been able to utilise its oil rents in particular to improve welfare unlike the Sub-Saharan counterpart.

Originality/value

This paper is the first to jointly estimate the impact of remittances, FD, and natural resources on welfare using a comprehensive measure of poverty – HDI.

Citation

Dwumfour, R.A., Agbloyor, E.K. and Abor, J.Y. (2017), "Correlates of poverty in Africa: Exploring the roles of remittances, financial development, and natural resources", International Journal of Social Economics, Vol. 44 No. 12, pp. 2033-2051. https://doi.org/10.1108/IJSE-12-2015-0319