Template-Type: ReDIF-Article 1.0
Author-Name: Zinah Khudhair Mhmood
Author-Name-First: Zinah
Author-Name-Last: Khudhair Mhmood
Author-Email: zynhz429@gmail.com
Author-Workplace-Name: PhD student, Department of Economics, Isf.C., Islamic Azad University, Isfahan, Iran.
Author-Name: Sara Ghobadi
Author-Name-First: Sara
Author-Name-Last: Ghobadi
Author-Email: sghobadi@iau.ac.ir
Author-Workplace-Name: Associate Professor, Department of Economics, Isf.C., Islamic Azad University, Isfahan, Iran.
Author-Name: Amjed Subhi Sahib
Author-Name-First: Amjed
Author-Name-Last: Subhi Sahib
Author-Email: amjadsubhi519@gmail.com
Author-Workplace-Name: Professor of Banking and Financial Sciences, Imam Al-Kadhum College, Wassit University, Iraq.
Author-Name: Hossein Sharifi Renani
Author-Name-First: Hossein
Author-Name-Last: Sharifi Renani
Author-Email: sharifi55r@iau.ac.ir
Author-Workplace-Name: Associate Professor, Department of Economics, Isf.C., Islamic Azad University, Isfahan, Iran.
Title: Analyzing the Relationship between Remittances, Financial Development, and Income Inequality in the Informal Sector of the Economy of Selected Developing Countries (Generalized Moments Approach)
Abstract: In developing countries, remittances and financial development are two key factors influencing income inequality. This study examines the simultaneous relationships among remittances, financial development, and the Gini coefficient, with a particular focus on the informal economy. The distinction between formal and informal sectors is crucial, as financial channels in the formal economy—such as the banking system, regulations, and taxation—differ significantly from informal pathways, including black markets and underground financial activities. Consequently, the effects of remittances and financial institutions on inequality may vary across these sectors. Using a simultaneous equation framework estimated with System Generalized Method of Moments (System GMM) for the period 2010–2023, the study also incorporates control variables including inflation, exchange rate, government size, education level, and trade openness. The findings indicate that remittances in the informal sector positively and significantly affect financial development, while income inequality negatively impacts it. Financial development in the informal sector significantly reduces inequality, whereas remittances in both formal and informal sectors increase income inequality. Bidirectional relationships among the main variables highlight their dynamic interactions, with the informal economic structure moderating the magnitude and direction of these effects. The results underscore the importance of strengthening formal financial institutions, enhancing financial depth, and effectively managing remittance flows to reduce inequality and improve economic performance in developing countries.
Classification-JEL: JEL
Keywords: Informal employment; remittances; Financial Development; Income Inequality
Journal: International Journal of Resistive Economics
Pages: 24-42
Volume: 14
Issue: 2
Year: 2026
Month: May
DOI: 10.22034/oajre.2026.570735.1183
File-URL: https://www.oajre.ir/article_240758_90d0afb580c2bbf64288efe3fff1ab25.pdf
File-Format: Application/pdf
File-Function: Full text
File-URL: https://www.oajre.ir/article_240758.html
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Handle: RePEc:trd:journl:240758