More Distance, More Remittance? Remitting Behavior, Travel Cost, and the Size of the Informal Channel

23 Pages Posted: 14 May 2020

Date Written: November 2019

Abstract

The rising number of foreign workers in Italy during the last 15 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 socioeconomic 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 (non‐observable) 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: immigration, informal flows, remittances, travel costs

Suggested Citation

Ferriani, Fabrizio and Oddo, Giacomo, More Distance, More Remittance? Remitting Behavior, Travel Cost, and the Size of the Informal Channel (November 2019). Economic Notes, Vol. 48, Issue 3, pp. n/a-n/a, 2019, Available at SSRN: https://ssrn.com/abstract=3597080 or http://dx.doi.org/10.1111/ecno.12146

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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