An Evaluation of the Social Costs of Payment Methods Literature

Abstract:     
The last few decades have produced many inconsistent estimates of the social costs of payment methods. This paper demonstrates that there is significant disagreement in the theoretical underpinnings of the studies, and that the methodologies used are not robust. Together, these factors make it difficult to draw conclusions about the relative costs and benefits of different payment methods, as different studies are likely to be comparing different elements, and their sensitivity makes it difficult to show that estimates are statistically different from one another. The repeated presentation of estimates without disclosure of the broad confidence intervals associated with those estimates is an ongoing problem for the literature and for policy makers who have relied upon those estimates. Future research should focus on the development of standards for estimation to facilitate comparisons across time and countries, and should fully discuss the sensitivity of new estimates.

Number of Pages in PDF File: 21

Keywords: payment method, network, payment card, social cost

JEL Classification: D6, E4, E5

working papers series