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Impact of Foreign Remittance on Household Wellbeing: the Case of Gondar City, Ethiopia

Abstract: 

About 620 thousands Ethiopian emigrants live abroad. As the country has a large number of emigrants in different countries, it received remittance income amounting to 387 million USD by the end of 2010. The question on quantitative impact of foreign remittances for the country in general and Gondar City in particular remains unanswered. Thus, the main objective of this study is to investigate the impact of foreign remittance on household wellbeing in Gondar city. The study was conducted from 353 sample households (160 Remittance receivers and 193 Remittance non-receivers) from 12 urban Kebeles of Gondar city in February 2011. PSM, ATT, FGT and Gini index are employed to analyze the data collected, in which they are used to measure to what extent foreign remittances can affect the household welfare, poverty and inequality by comparing the remittance receiver and non-receiver households. Four types of matching estimators (stratification, nearest neighbor, radius and kernel) are used to confirm the robustness of the estimation. The results of the study indicated that foreign remittance had a positive and significant impact on households’ total per-capita expenditure. Gains from international remittance range from Birr 69.84 to Birr 360.67, Birr 4963.91 to Birr 11084.4 and Birr 1837.70 to Birr 4225.90 for food and non food total expenditure per-month, capital goods value and personal items per-capita, respectively. The survey result shows that an individual residing in Gondar city spends for survival Birr 7.50 and 2.50 per day for food and non-food items, respectively. Based on the total poverty line (3600.50/annum/capita), the results of absolute head count ratio, Poverty gap, and Poverty Severity are 20.40%, 3.8% and 1.1%, respectively. The poverty indices based on annual per-capita income including households’ foreign remittance income at a given poverty line indicates that 26%, 9%, and 5% are from absolute head count ratio, poverty gap and poverty severity, respectively. On the other hand, if the households’ foreign remittance income is excluded from their annual permanent income; absolute head count ratio, poverty gap and poverty severity stand at 37%, 18.3% and 12.8%, respectively. The income also shows that foreign remittance has a share of 24.35% and trade 27%. Generally, there is a possibility to conclude that foreign remittance income has a positive impact on poverty reduction and minimization of income inequality between households.

Corporate Author: 
Demirew Getachew; Getenet Alemu; Worku Gebeyehu (Editors) and Ethiopian Economic Association
Publisher: 
Ethiopian Economic Association (EEA)
ISBN/ISSN: 
978-99944-54-31-10
Primary Descriptors: 

Foreign remittance; wellbeing

Secondary Descriptor: 

propensity score matching, inequalit

Geographic Descriptors: 
Ethiopia - Gondar
Cataloge Date: 
10/10/2013
Broad Subject heading: 
poverty
Call Number: 
330.963 PRO 2013
Serial Key Title: 
Proceeding of the Tenth International Conference on the Ethiopian EconomyEconomy
Publication catagory: 
Content type: 
Volume: 
I
Publication date: 
2013-06-01 00:00:00
Conference Place: 
EEA Multi-Purpose Building Conference Hall, Addis Ababa
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annually
Conference date: 
July 19 - 21, 2012