International Remittances, Domestic Remittances, and Income Inequality in the Dominican Republic

Inequality decomposition techniques are used to analyze the different impacts of domestic and international remittances on household income inequality in the Dominican Republic. Domestic remittances seem more likely to be equalizing than international remittances. The negative marginal effect on inequality of domestic remittances is more prominent among rural households, and in particular among landless rural households, while the negative marginal effect on inequality of international remittances is more prominent among urban households, and in particular outside of the Santo Domingo area. Stronger marginal effects of remittances were found among female-headed households, the elderly and the less educated. Both domestic and international remittances are higher among female-headed households and the elderly. Education is associated with lower domestic remittances and higher international remittances, probably reflecting the role of education in promoting international versus domestic migration. An increase in schooling increases inequality through domestic remittances and decreases inequality through international remittances, while a reduction in household size reduces inequality through both domestic and international remittances. This analysis highlights the importance of the distinction between domestic and international remittances as drivers of inequality as well as the importance of identifying and quantifying the determinants of remittances and their subsequent impact on inequality.