More Distance, More Remittance? Remitting Behaviour, Travel Costs and the Size of the Informal Channel

34 Pages Posted: 27 Feb 2018 Last revised: 23 Oct 2018

Date Written: September 17, 2018

Abstract

The rising number of foreign workers in Italy during the last fifteen years has led to a conspicuous increase in the amount of remittances sent abroad. In this paper we examine the determinants of remittance outflows originated in Italy and transferred abroad through registered financial intermediaries. After controlling for a wide set of socio-economic regressors, we document a strong positive relation between remittances and the cost of travel between Italy and the migrants’ respective home countries. We interpret this result as indirect evidence of unrecorded flows, since the relation between remittances and travel cost should be non-significant unless geographical proximity permits remitters to switch to informal (nonobservable) transmission mechanisms. Moreover, using data on temporal and monetary costs for a subset of bilateral corridors, we also find remittances to be negatively correlated with high transaction costs and low speed of transfer. We rely on this empirical evidence and on a model of migrants’ remitting behavior to present new strategies for estimating the size of the informal outflow.

Keywords: remittances, immigration, informal flows, travel costs

JEL Classification: F22, F24, O15

Suggested Citation

Ferriani, Fabrizio and Oddo, Giacomo, More Distance, More Remittance? Remitting Behaviour, Travel Costs and the Size of the Informal Channel (September 17, 2018). Available at SSRN: https://ssrn.com/abstract=3116750 or http://dx.doi.org/10.2139/ssrn.3116750

Fabrizio Ferriani (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Giacomo Oddo

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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