Journal Article

No. 2016-4 | February 01, 2016
Do Transfer Costs Matter for Foreign Remittances? A Gravity Model Approach PDF Icon

Abstract

Using bilateral data on remittance flows to Pakistan for 23 major host countries, this is the first study that examines the effect of transaction costs on foreign remittances. The authors find that the effect of transaction costs on remittance flows is negative and significant; suggesting that a high cost will either refrain migrants from sending money back home or make them remit through informal channels. They also find that remittances are facilitated by the existence of migrant networks and improvements in home and host country financial services. Distance, which has been used in previous studies as an indicator of the cost of remitting, is found to be a poor proxy.

Data Set

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The data set for this article can be found at: http://dx.doi.org/10.7910/DVN/2HNZ2I

JEL Classification

F22 F30 O11

Citation

Junaid Ahmed and Inmaculada Martínez-Zarzoso (2016). Do Transfer Costs Matter for Foreign Remittances? A Gravity Model Approach. Economics: The Open-Access, Open-Assessment E-Journal, 10 (2016-4): 1—36. http://dx.doi.org/10.5018/economics-ejournal.ja.2016-4

Assessment

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