This paper examines the macro and microeconomic relation between remittances and poverty/inequality in Pakistan. Remittance
inflows to Pakistan are disaggregated with respect to principal remitting regions, namely North America, the Persian Gulf and the
European Union, and their respective impacts on inequality and poverty are analyzed. The empirical strategy followed is based on the
differenced variables given that our main variables are non-stationary. The results show that remittances from the Middle-East have a
negative and significant impact on poverty and inequality in Pakistan. The impact of remittances on poverty is found to be stronger
than that on inequality, while income inequality falls more than consumption inequality. The aggregate macroeconomic evidence is
confirmed on the micro-level using the 2001-02 and 2005-06 household survey data. The findings show that individuals receiving
international and domestic remittances are less likely to be poor and more likely to belong to higher quintiles of the income
distribution. The impact of international remittances on poverty and inequality is higher in 2001-02, while in 2005-06 that of internal
remittances is stronger. The results generally confirm the significant role played by remittances in terms of poverty alleviation and
inequality reduction. The study finds household savings to be the channel through which remittances influence poverty and inequality
in Pakistan. Efforts therefore need to be made to provide better avenues of investment so that these savings can be harnessed
efficiently for job creation and poverty alleviation.