The Impact of International Remittance on Poverty, Household Consumption and Investment in Urban Ethiopia: Evidence from Cross-Sectional Measures

To assess the impact of international remittances on poverty, household consumption and investment in urban Ethiopia, this study used primary household survey data collected from four major urban areas of the country namely Addis Ababa, Gonder, Hawassa and Mekelle. The study finds that international remittances substantially reduced the level, depth and severity of poverty among remittance recipient groups and the whole sample. For the sub sample of households which received remittances poverty head count index, poverty gap and squared poverty gap declined by 64 percent, 67 percent and 70 percent respectively. While for the whole sample it was reduced by 43 percent, 33 percent and 50 percent respectively. The survey result also shows that comparing expenditure patterns of both groups of households, there is non-statistically significant difference in terms of expenditures on non durable goods such as food. But clear difference exits in expenditure patterns on health expenses, where non remittance receiving households spend more than twice on health compared to remittance receiving households. In general, the findings suggest that remittances can be used as a tool to fight poverty in Ethiopia considering the fact that remittances had effect on poverty. Therefore this study can be used as an input to formulate policies associated with migrant remittances as they play a crucial role in reducing poverty in Ethiopia.