Exploring the Macroeconomic Drivers of International Bilateral-Remittance Flows: A Gravity-Model Approach

This paper investigates the macroeconomic determinants of global bilateral remittances flows. Unlike existing studies, which have been often hampered by the lack of comprehensive and large-enough datasets, we use data originally covering 214 World countries over the 2010-2017 period. We employ a gravity-model approach to explore the role payed by dyadic and country-specific covariates in explaining remittances. We find that remittance flows are robustly and strongly impacted by size effects (i.e., number of migrants in the host country and population at home); transaction costs; common social, political and cultural ties; output growth rate and financial development at home. We also document the existence of a robust non-linear relationship between per-capita income at home and remittance flows, both in the aggregate and across income group. Our results suggest that altruistic and self-interested motives non-trivially interact and change across both host/home income groups and income level at home.