Relationship between international remittances, political stability and income inequality: evidence from MENA countries

Purpose: Despite the significant role of remittances in the Middle East and North Africa (MENA) region, their impact on income inequality has received limited attention in related research, especially in times of political instability. Therefore, this paper explores the moderating effect of political stability on the strengthening of the relationship between remittance inflows and income inequality in MENA countries over the period 1996–2022. Design/methodology/approach: This paper utilizes the pooled mean group (PMG) approach. For robustness, Dumitrescu and Hurlin’s (2012) panel Granger non-causality test has been conducted, revealing the absence of reverse causality. Findings: This paper demonstrates that remittance inflows increase income inequality in MENA recipient countries, indicating that most individuals receiving remittances in the MENA region are predominantly from well-off families. In addition, political stability reduces income inequality in MENA recipient countries, while remittance inflows increase income inequality when the polity becomes less stable. Practical implications: We recommend addressing obstacles faced by low-income groups seeking migration, especially in countries with high unemployment rates, such as deficiencies in education, skills, information asymmetry and financial constraints. Additionally, supplementary policies, such as directing resources toward pro-poor projects, particularly those that improve education, health and infrastructure, should be implemented to mitigate the adverse effects of remittances on income distribution. Finally, priority must be given to policies that promote political stability to create a business environment conducive to human and physical investments. Originality/value: The paper addresses the impact of remittances on income inequality in the MENA region, which has received limited attention in previous research.

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