Inequality, Poverty and Financial Inclusion in the Middle East and North Africa
Friday, Jan. 4, 2019 2:30 PM - 4:30 PM
- Chair: Mahdi Majbouri, Babson College
Poverty and Economic Volatility: Remittances Versus Official Development Assistance
AbstractMigration is very important aspect of globalisation, but also the least understood and most controversial. Migration of people across international borders effects economic growth and social welfare in both sending and receiving countries. Every year, more than five million people in search of better opportunities cross international borders to go and live in a developed country. As consequence, the stock of migrants has more than doubled over the past 40 years to reach more than 257 million migrants, representing around 4% of the world’s population (United Nation, 2017).
This increase in the volume of international migration has led to unprecedented increase in financial flows to labor-exporting countries. Only considering remittances passing through formal channels, the World Bank estimates that remittances reached 440.1 billion dollar US in 2010 (Fact Book, 2011). In fact, remittances sent to developing countries have increased spectacularly over the last three decades to represent the large majority of remittances flows today. According to the World Bank (2011), formally recorded remittances sent to developing countries reached 325.5 billion in 2010 dollar US. After a modest decline in 2009, because of the global financial crisis, remittances flows to developing countries are expect to grow at a lower but sustainable rate of 7-8 percent annually during 2011-2013 to reach 450 billion dollar US by 2016. However, remittances benefit some regions more than others. With 73 billion dollar us of remittance, the MENA region is one of the top remittance recipient in the world after East Asia and Pacific, and Latin America and the Caribbean.
In this region, the countries are at the same time recipients of foreign external aid. Consequently, the Low and Middle Income MENA’s countries could be very interesting for analysing the relative efficiency of external aid and remittances. Remittances can operate as a social protection system. In this, paper, we examine the negative effect of economic volatility on poverty and the role played by migrant remittances and Official Development Assistance (ODA) to mitigate this effect. The study is conducted on a sample of the Low and Middle Income MENA’s countries observed between 1985 and 2014. We find that, contrary to ODA, remittances have a stabilizing effect and allow to mitigate this effect.
Cost of Living Changes After a Large-Scale Depreciation: The Case of Egypt
AbstractIn November 2016 Egypt went through a massive devaluation of its currency. This was followed by a jump in prices, particularly for traded goods including food, and particularly in Rural Lower, Rural Upper and Urban Lower regions. Using data from the Central Bank of Egypt and microdata from the 2008-2015 Household Income, Expenditure and Consumption Surveys, this study investigates the pass-through of exchange rate changes to prices of various commodities across all regions and, through households’ consumption and substitution patterns, the implications for households’ cost of living and welfare. Predictions of the one-month and six-month impacts of the November 2016 devaluation are made. Our results show that typically 4% of exchange rate changes are passed through to prices immediately, and cumulatively approximately 9% are passed through over the six months after devaluation. Accounting for households’ consumption patterns, we compute fixed-weight Laspeyres price indices and cost of living indices to compare the impact of the devaluation to a counterfactual scenario without it. We find that the cost of living of an average household rises by as much as 50% following the devaluation, and the household’s expenditure would have had to rise by twice as much after the devaluation to maintain its 2015 real expenditure level, compared to the counterfactual. These effects are higher still among households in the poorest income quintiles in all regions and by all cost-of-living measures.
Does Trust on Institution Affect the Informal Activities Among Youth in MENA Region (Algeria, Tunisia, Morocco, Egypt and Lebanon)?
AbstractSeveral empirical works have analyzed the determinants of being in informal sector. Most focus on the effect of socioeconomic factors such as level of education, regions of residence, skills acquired, and gender. The most recent works has find that institutional factors can influence decisions to undertake activities in the informal sector such as corruption, Regulations and legislation (Hart, 2012; Schneider et al., 2010) or tax burden (Schneider and Enste, 2000; Ferraira-Tiryaki, 2008, Friedman and al, 2000, Frey and Torgler2007) but alternative explanation concerning the institutional factor include Portes (1994, 2005, 2010) and Burroni et al. (2008) concern the effect of institutional trust “Informality is curbed by institutional trust”. This article presents an empirical analysis of the determinants of being in informality for youth’s people in selected MENA countries (Algeria, Egypt, Tunisia and Lebanon) focusing on the effect of institutional trust. The analysis of the data suggests that the general level of young people’s trust in different institutions is low. The estimation results of discrete choice model using recent survey“ SAHWA “, confirm that youth’s people trusts in institutions have a significant effect on the likelihood of being in informality. However, it seems to differ according to witch institutions are considered and by countries.
- I3 - Welfare, Well-Being, and Poverty
- O1 - Economic Development