The Role of Remittances in Alleviating Household Poverty: A Case Study of West African Countries

Abstract

This study is motivated by the persistent challenge of poverty and unequal growth in West Africa, and seeks to explore how migrant remittances can be effectively leveraged to promote inclusive and sustainable development across the region. Using household consumption as a proxy for welfare, the research adopts a quantitative ex post facto design and models household consumption as a function of remittances, government expenditures on education and health, employment, and literacy rate. The Panel Autoregressive Distributed Lag (PARDL) approach is employed, as it is suitable for heterogeneous panels with variables integrated of mixed orders [I(0)] and [I(I)]. Descriptive statistics reveal a significant variation among variables, while correlation analysis indicates a strong positive association between remittances and consumption. Panel unit root and cointegration tests confirm stationarity at mixed orders and the existence of a stable long-run equilibrium relationship among the variables. The long-run estimates show that government expenditure on education and health significantly enhances household consumption, underscoring the critical role of social sector investment in improving welfare. Conversely, remittances and literacy rate exhibit negative long-run effects, suggesting that remittance income and higher literacy levels may encourage saving or investment rather than immediate consumption. Employment was found to be insignificant, implying that existing job creation efforts have not effectively translated into improved household welfare. The significant and negative error correction term further validates the existence of a stable long-run relationship. The study recommends that governments increase and efficiently manage public expenditure on education and health, promote the productive use of remittances, and enhance the quality and stability of employment. Furthermore, strengthening financial literacy and social protection frameworks will enable households to balance saving and consumption, ensuring that economic growth translates into sustained poverty reduction and inclusive welfare improvement.