This paper presents a static computable general equilibrium (CGE) framework to
numerically examine the impact of international remittances and the brain drain on
poverty reduction as well as income inequality in Ghana. The generalized framework
with the latest Ghanaian input-output table of year 2005 with 59 different production
sectors provides the following results: On the impact of international remittances, more
remittances reduce poverty, and expand the Ghanaian economy. On the impact on
income inequality, it depends on who receives more remittances. If the rural (urban)
households receive more remittances, then income inequality shrinks (widens). On
the impact of the brain drain, it is negative to both poverty reduction and income
inequality, even if the externality effect of the brain drain is taken into account. On
the overall impact of both remittances and the brain drain in Ghana, income inequality
becomes more severe. On the other hand, the overall impact on poverty reduction, it
depends on the amount of remittances as well as the sector where the brain drain occurs.
As long as the brain drain occurs in either the education or the health sector, then
the positive impact of remittances outweighs the negative impact of the brain drain.
However, if the brain drain occurs in all sectors, then the overall impact would result
in the damage of Ghanaian economy. Even though the positive impact of international
remittances is taken into account, the Ghanaian economy has been damaged by the
brain drain, and emigration from Ghana has resulted in more income inequality and
lower income.