The Role of Remittances in Shaping Income Inequality in Lebanon Before and After the Crisis: An Empirical Analysis Using Macroeconomic and Financial Perspectives

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

Please see the attached file. 

Comments for author File: Comments.pdf

Author Response

Comment 1:

My recommendation for the improvement is that a more detailed theoretical discussion
on why remittances show no significant short-run effect would strengthen the interpretation
should be added.

Response :

We appreciate the insightful comment of the reviewer. Therefore, in response to it, we have elevated the theoretical discussion of the short-run irrelevance of remittances in the revised manuscript. Specifically, we added some economic theories and new empirical considerations like the Permanent Income Hypothesis, the migration life-cycle theory, adjustment lag theory, and migration selectivity hypothesis to provide a discussion on why the effect of remittances on income inequality might be lagged. These have been integrated in the literature review section and all changes have been clearly marked in the manuscript.
Comment 2: 

Including alternative inequality measures (e.g., Theil Index) could help cross-check robustness and generalize the findings.

Response : 

We appreciate the reviewer’s valuable suggestion. Theil index data for Lebanon is unavailable for the period covered in this study (2000-2023), limiting our ability to compare it with the Gini coefficient. Moreover, the Gini index is the most widely used measure of income inequality across a large body of literature and by major international institutions such as the World Bank, UNDP, IMF, OECD, and WID.world. According to the World Bank, the Gini coefficient is better and more widely used than the Theil index for general inequality analysis, policy reporting, and cross-country or time-series comparisons. Use the Theil index only if the research requires decomposition of inequality (e.g., within-region vs. between-region effects).

 

Reviewer 2 Report

Comments and Suggestions for Authors

Thanks to the editor for inviting me as the reviewer for this manuscript, “The Role of Remittances in Shaping Income Inequality in Lebanon Before and After the Crisis: An Empirical Analysis with Macroeconomic and Financial Perspective (Manuscript ID: sustainability-3720519).

In this study, the authors tested the impact of remittances on income inequality in  Lebanon from 2000 to 2023. Using the Johansen cointegrating test, the authors examined both the short-term and the long-term relationships between remittances and income inequality while controlling significant macroeconomic variables like Financial Development, GDP, and Household Consumption Expenditure. The authors also analyzed how remittances correlate with financial development and Household Consumption Expenditure.

The results indicate that the overall financial system and household consumption influence the remittance-inequality relationship. A broad and well-developed financial sector, in the absence of financial inclusion, can weaken or even nullify the reducing power of remittances on inequality. However, an economy where families can direct remittances to productive uses raises their contribution to inequality reduction in the long run. In the short run, consumption alone does not affect income inequality unless paired with stable, supportive inflows like remittances.

 

Comments:

The authors conduct a very detailed analysis to examine the relationships between remittances and income inequality both in long-run (cointegration) and short-run (error correction model) with appropriate econometric methodology. I have a few concerns on the analysis.

1. The sample size is too small. There are only 24 observations. The parameters estimates in the equation M2-A and M2-B may not be stable. It would be ideal if the authors can use the panel data by combining a few more countries in the analysis.
2. A scatter plot or time series graphs of remittances and income inequality should be provided to see whether long-run relationship exist.
3. Section 4 should be shortened to 1 page.
4. Table 7 should be rearranged. It is a bit messy to read it. For example, please rearrange the the row in the order of A does not Granger cause B, A not Granger cause C, .........
5. Why does GDP needs to take log, but FD and HCE are not required to take the log?

Author Response

Comment 1: 

The sample size is too small. There are only 24 observations. The parameters estimates in the equation M2-A and M2-B may not be stable. It would be ideal if the authors can use the panel data by combining a few more countries in the analysis.

Response:

We sincerely thank the reviewer for this important comment. The limitation of small sample stems from the data availability for Lebanon and the variables under study, especially for the Gini index, where no data is available before that date. Despite extensive efforts to access earlier data, no reliable, consistent, or internationally comparable income inequality data for Lebanon could be obtained for years before 2000.

   Several Empirical studies testing income inequality in Lebanon or similar countries have used a similar sample size or even smaller due to the same constraints, indicating that this is a common limitation in the literature, especially for countries that lack data availability, like Lebanon.

    We will address these data limitations (small sample size) in the revised limitations section to transparently communicate these challenges. Moreover, we have deliberately selected Lebanon as a single country case due to its unique remittance dynamics and macroeconomic challenges, especially around critical structural breakpoints like the 2019 financial crisis. Including other countries within a panel framework would compromise the contextual depth we aimed to create. However, we think a panel analysis might be an interesting area for future research.

In handling the parameter instability problem, we accomplished that by applying unit root and cointegration tests, a structural break dummies (2019) and (2006), and several robustness checks for short-run and long-run coefficients with different post-estimation tests. All these were aimed at mitigating estimation bias caused by the limitation of small sample size.

Comment 2:

A scatter plot or time series graphs of remittances and income inequality should be provided to see whether long-run relationship exist.

Response:

A time series graph is provided in the revised version of the manuscript as requested.

Comment 3:

Section 4 should be shortened to 1 page.

Response:

Section 4 ( Conclusion) is shortened to 1 page and provided in the revised version of the manuscript as requested.

Comment 4: 

Table 7 should be rearranged. It is a bit messy to read it. For example, please rearrange the the row in the order of A does not Granger cause B, A not Granger cause C, .........

Response:

Table 7 is rearranged by the authors as requested by the reviewer and provided in the in the revised version of the manuscript

Comment 5:

Why does GDP needs to take log, but FD and HCE are not required to take the log?

Response:

We took the logarithm of GDP to reduce scale-related skewness, stabilize variance, and allow for elasticity-based interpretation, whereas variables like FD and HCE are already in ratio or index form, making log transformation unnecessary and potentially distorting.

Reviewer 3 Report

Comments and Suggestions for Authors

The paper investigates the role of remittances in shaping income inequality, focusing on the case study of Lebanon - specifically the pre- and post-2019 crisis period. We recommend that the authors address the following issues:

• Clearly define the aim of the research;
• Add the research objectives;
• Clarify the concept of remittance by providing definitions;
• Consult the journal’s author guidelines and ensure that citation standards are followed; additionally, standardize the referencing style within the text - in some places it appears as "Acosta and others" (see line 133), while in others as "Acosta et al. (2008)" (see line 157);
• Cite the source below each figure (Figure 1, Figure 2, etc.);
• Include a Discussion section and interpret the research findings in light of existing studies and literature.

Author Response

Comment 1: 

Clearly define the aim of the research

Response:

The aim is adjusted and clearly defined in the introduction section of the revised Manuscript as requested and clearly Marked.

Comment 2:

Add the research objectives

Response:

The research objectives are clearly added in the introduction section of the revised Manuscript as requested and clearly Marked.

Comment 3:

Clarify the concept of remittance by providing definitions

Response:

We thank the reviewer for this helpful suggestion. We have clarified the concept of remittances by incorporating formal definitions from reputable sources. These definitions have been added in the revised manuscript, as part of the literature review , and the changes are clearly marked.

Comment 4 and 5:

Consult the journal’s author guidelines and ensure that citation standards are followed; additionally, standardize the referencing style within the text - in some places it appears as "Acosta and others" (see line 133), while in others as "Acosta et al. (2008)" (see line 157). Cite the source below each figure (Figure 1, Figure 2, etc.).

Response:

All citations have been thoroughly revised and corrected in the revised manuscript, as requested, and the changes are clearly marked.

Comment 5:

Include a Discussion section and interpret the research findings in light of existing studies and literature

Response:

Thank you for this valuable suggestion. In the revised manuscript, the Result and Discussion section has been separated from the Methodology section and presented as an independent section. We have also interpreted the research findings in light of relevant existing studies and literature, highlighting points of consistency or divergence with prior work. All revisions have been clearly marked in the updated manuscript as requested.

 

Reviewer 4 Report

Comments and Suggestions for Authors

I thank the authors for the research, which seemed to me specific and interesting from an applied point of view. The search for factors influencing income inequality among the population is an urgent socio-economic and political task. In the paper, the authors investigate the factor of the volume of remittances as a potential factor influencing the level of inequality, expressed here by the Gini coefficient. At the same time, an analysis of the short- and long-term impact, the specifics of the impact during the crisis period, as well as in situations with different levels of economic development and consumption is carried out. The research methodology is adequate, the sequence of stages is logical. The application of the cointegration method is justified, first of all, precisely by long-term expectations of the dependence of the level of inequality on the volume of remittances. To confirm the constructed regression models, a number of verification tests were applied, showing the reliability of the conclusions obtained.

Some questions and comments.

1. The expediency of formulating hypothesis 1 (H1) in this form is not entirely clear, since the purpose of the study is to determine the impact of remittances alone on income inequality. GDP and consumption are not included in the purpose of the study. We need to adjust this wording.

2. There is no need to depict Figure 2, since it contains a minimum of information (2 figures on the change in the Gini coefficient). If you can show a change in the Gini curve, you need to do it, and the work will be perceived better.

3. It is advisable to separate the "Results and discussion" section rather than expand the methodology section. The authors identify the discussion positions sequentially with the description of the results.

I wish you success in your further research!

Author Response

Comment 1:

The expediency of formulating hypothesis 1 (H1) in this form is not entirely clear, since the purpose of the study is to determine the impact of remittances alone on income inequality. GDP and consumption are not included in the purpose of the study. We need to adjust this wording.

Response:

We sincerely appreciate the reviewer’s insightful and constructive comments. The hypothesis is adjusted as requested, including only remittances and income inequality

H1: Remittances have a significant long-run and/or short-run effect on income inequality in Lebanon.

Comment 2:

There is no need to depict Figure 2, since it contains a minimum of information (2 figures on the change in the Gini coefficient). If you can show a change in the Gini curve, you need to do it, and the work will be perceived better.

Response:

The authors removed figure 2 and included a new time series graph that includes both remittances and Gini as requested by one of the reviewers, we included the figures in the revised version of the Manuscript.

Comment3:

 It is advisable to separate the "Results and discussion" section rather than expand the methodology section. The authors identify the discussion positions sequentially with the description of the results.

Response:

The Results and Discussion section has been separated as requested in the revised version of the manuscript. All revisions are clearly marked.

 

Reviewer 5 Report

Comments and Suggestions for Authors

‘Before and After the Crisis’ – what specific crisis? This should be mentioned to avoid any confusion. The abstract should have only one paragraph. ‘Lebanon’s large diaspora and long-term mobility have rendered it one of the most remittance-dependent economies globally’ – this is vague, be each time concrete-data specific. The figures are not consistently constructed and need more analysis. ‘a finding emphasized by Adams and Page in 2005 (Adams & Page, 2005)’ - a finding emphasized by Adams and Page (2005). ‘The World Bank (2011) also corroborated that remiĴance flows are associated with more equitable income distributions in poorer economies’ – check that you substantiate your claims by the most recent available sources as things might have changed in the meantime. Here’s another example: ‘Evidence, as provided by Fajnzylber and López (2007) and Adams (2006), illustrated that where migration is expensive, the remiĴance gains go to middle- and upper-income groups’. As the hypotheses are based mainly on quite old sources, they cannot reflect the current state of things. E.g., H3 and H4 are based on 13–15 years old sources only. ‘In their study’, ‘SSRN Working Paper in 2023 by’, ‘University of Barcelona Working Paper’, etc. – remove, for style consistency. ‘Ahmed et al.’ vs. ‘Ofori, Gbolonyo, Dossou, & Nkrumah (2022)’ vs. ‘Acosta and others (2008)’ – variable in-text citation style. ‘GDP impact on Income inequality’, ‘However, A nonlinear’, ‘found a Positive’, ‘historical studies, the Researchers’, etc. – why initial word capitalization? Sometimes there are extra (e.g., ‘Uddin (2022) suggested’) or no spaces (e.g., ‘(2023)showed’) between words throughout the manuscript. ‘(Wolrd Bank, 2021)’ - (World Bank, 2021). Figure 3 is unclear. ‘by authors like (Stark, Taylor, & Yiĵhaki, 1986)’ - by authors like Stark et al. (1986). The equations should not be in bold. Comparisons with other research results should be positioned in a Discussion section: ‘Our result corroborates Aggarwal et al. (2011) and Beine & Lodigiani (2010)’, ‘This is also corroborated by Acosta et al. (2008)’, ‘The study findings align with Taylor et al. (2005), and Ratha (2005’, ‘Our findings align with Calderón and Page (2012)’, etc. The tables require more explanations. The contents of the Appendix would be more appropriate in the manuscript, for better correlations. The reference list is not properly edited, some sources are listed even 2-3 times, and the proportion of SSCI/SCIE articles is quite low.

 

Author Response

 

Comment 1:
Before and After the Crisis – what specific crisis? This should be mentioned to avoid any confusion.

Response:
We thank the reviewer for this observation. The term "crisis" has been clarified in the revised manuscript to refer specifically to the 2019 financial and economic crisis in Lebanon, which marked a turning point in the country’s remittance patterns and economic structure. The revision is clearly marked in the relevant section.

Comment 2:
The abstract should have only one paragraph.

Response:
The abstract has been revised and consolidated into a single paragraph, as requested.

Comment 3:
'Lebanon’s large diaspora and long-term mobility have rendered it one of the most remittance-dependent economies globally' – this is vague, be each time concrete-data specific.

Response:
The sentence has been revised to include concrete data. For example, we now specify that remittances accounted for over 30% of Lebanon’s GDP in 2022, according to World Bank data, making Lebanon one of the top recipients globally in terms of remittances-to-GDP ratio.

Comment 4:
The figures are not consistently constructed and need more analysis.

Response:
All figures have been reviewed for consistency in formatting, labeling, and interpretation. Additional explanatory captions and discussions have been added where needed to improve clarity and analytical depth.

Comment 5:
'A finding emphasized by Adams and Page in 2005 (Adams & Page, 2005)' – a finding emphasized by Adams and Page (2005).

Response:
The citation has been corrected to: "a finding emphasized by Adams and Page (2005)."

Comment 6:
The World Bank (2011) also corroborated that remittance flows are associated with more equitable income distributions in poorer economies’ – check that you substantiate your claims by the most recent available sources, as things might have changed in the meantime.

Response:
We have updated this part of the literature with more recent sources, and replaced outdated references where appropriate.

Comment 7:
Evidence provided by Fajnzylber and López (2007) and Adams (2006)... H3 and H4 are based on quite old sources.

Response:
While these foundational studies are important for theoretical grounding, we have now supplemented H3 and H4 with more recent empirical studies to better reflect current trends and strengthen the hypotheses.

Comment 8:
In-text citation style is inconsistent.

Response:
All in-text citations have been reviewed and standardized according to the required citation style. 

Comment 9:
Unnecessary capitalization: 'GDP impact on Income inequality', etc.

Response:
Capitalization has been corrected throughout the manuscript to follow standard academic style guidelines.

Comment 10:
Spacing and typos: 'Uddin (2022) suggested' vs. '(2023)showed', '(Wolrd Bank, 2021)'.

Response:
The manuscript has been thoroughly proofread to correct spacing issues and typographical errors, including spelling mistakes like "Wolrd Bank."

Comment 11:
Figure 3 is unclear. Citation style for authors should be corrected.

Response:
Figure 3 has been revised for clarity, and the citation "by authors like (Stark, Taylor, & Yitzhaki, 1986)" has been corrected to "by authors like Stark et al. (1986)."

Comment 12:
The equations should not be in bold.

Response:
All equations have been reformatted to remove bold styling, as requested.

Comment 13:
Comparisons with other research results should be in a Discussion section.

Response:
We have moved all comparison statements with prior research to a separate, clearly labeled Results and Discussion section. This section interprets findings and discussion in light of existing literature, as suggested.

Comment 14:
The tables require more explanations.

Response:
Additional explanations have been added to table captions and the surrounding text to clarify the contents and highlight key takeaways.

Comment 15:
The contents of the Appendix would be more appropriate in the manuscript.

Response:
Relevant content from the Appendix has been integrated into the main manuscript to enhance the flow and ensure that important correlations are directly visible to the reader.

Comment 16:
The reference list is not properly edited. Some sources are listed multiple times. Low proportion of SSCI/SCIE articles.

Response:
The reference list has been carefully edited to remove duplicates and ensure proper formatting. We have also increased the inclusion of SSCI/SCIE-indexed sources to improve the scholarly quality of the references.

Round 2

Reviewer 3 Report

Comments and Suggestions for Authors

The authors have addressed the reviewer's recommendations. The paper can be considered for publication. 

Reviewer 5 Report

Comments and Suggestions for Authors

You can publish this.