Paper short abstract:

Remittances have positive direct and indirect impact on IHDI. A 1% change in the level of remittances leads to an increase in inclusive development of 0.90%. Remittances reduce inequalities by allowing the poor people to access financial system and obtain formal loans.

Paper long abstract:

Sub-Saharan Africa's economic growth is marred by massive poverty and rising inequality, demonstrating that its economic growth isn't inclusive. These scourges cause a number of problems, including political instability, social unrest, conflict and massive emigration. Our objective is to determine the impact of remittances on inclusive development in Sub-Saharan Africa. Based on the theory of the new economy of labour migration and remittances; models that take account liquidity constraints. According to recent literature on inclusive development in Africa, the Inequality-adjusted Human Development Index is used as a proxy of inclusive development. Based on a sample of thirty-four developing countries in sub-Saharan Africa from 2010 to 2017, we estimate our models using the fixed effects instrumental variables (FEIV) and Generalized Equation of Estimation (GEE) methods. Transfers positively and indirectly affect inclusive development through mobile telephony and financial development. Moreover, knowing that majority of remittances are received by the poor, which implies that they are not only a source of income for households, but also allow them to access the financial system and obtain formal loans. Therefore, policies to strengthen transnational linkages and financial development will increase the impact of remittances on inclusive development in beneficiary countries.