IMF Working Papers

Remittances and Social Safety Nets During COVID-19: Evidence From Georgia and the Kyrgyz Republic

Author/Editor:

Nordine Abidi ; Mehdi Akhbari ; Bashar Hlayhel ; Sahra Sakha

Publication Date:

May 5, 2023

Electronic Access:

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Summary:

Remittance flows in emerging market and developing economies were surprisingly resilient during the COVID-19 crisis, providing much-needed income support for remittance-receiving households. However, households were impacted differently across income distributions. Using novel high-frequency household panel data for Georgia and the Kyrgyz Republic and a difference-in-differences approach, we find that as household income fell during the pandemic, remittance-receiving households were more affected than non-remittance-receiving households. Importantly, we find that the incomes of poor, remittance-receiving households in the Kyrgyz Republic were more adversely affected than their non-remittance-receiving counterparts. In contrast, in Georgia, affluent remittance-receiving households experienced more significant income declines than poor remittance-receiving households. This heterogeneous impact can largely be explained by variations in the effectiveness of social safety nets in the two countries. Our results have important policy implications. Although remittances remained resilient during the pandemic, they affected households differently. As such, policymakers should prioritize addressing gaps in social safety nets to support the most vulnerable.

Series:

Working Paper No. 2023/094

Subject:

Balance of payments COVID-19 Expenditure Health Income Income distribution National accounts Remittances Social assistance spending

Frequency:

regular