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How Cost Elastic are Remittances? Estimates from Tongan Migrants in New Zealand

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Author Info
John Gibson () (University of Waikato)
David McKenzie (Development Research Group, The World Bank)
Halahingano Rohorua (University of Waikato)

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Abstract

Pacific Island economies are some of the most remittance- dependent in the world. Proposals to lower the costs of sending money across borders are a core recommendation of recent international studies that aim to enhance the development impact of remittances. The potential increase in remittances that recipient countries can expect from such policies depends critically on the sensitivity of remittance transfers to the costs of remitting. This paper provides the first estimates of the cost-elasticity of remittances, using data from a survey of Tongan migrants in New Zealand. The costs of remitting to Tonga are high by international standards and remittances are found to have a negative cost-elasticity with respect to the fixed fee component of money transfer costs. These findings suggest that Pacific Island countries can expect a more than proportionate increase in remittances from a reduction in costs.

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File URL: ftp://mngt.waikato.ac.nz/RePEc/wai/econwp/0602.pdf
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Publisher Info
Paper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 06/02.

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Length: 29 pages
Date of creation: 31 Mar 2006
Date of revision:
Handle: RePEc:wai:econwp:06/02

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Related research
Keywords: remittances; cost elasticity; Tonga;

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Find related papers by JEL classification:
F22 - International Economics - - International Factor Movements and International Business - - - International Migration
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rapoport, Hillel & Docquier, Frédéric, 2005. "The Economics of Migrants’ Remittances," IZA Discussion Papers 1531, Institute for the Study of Labor (IZA). [Downloadable!]
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  2. Brown, Richard P. C., 1997. "Estimating remittance functions for Pacific Island Migrants," World Development, Elsevier, vol. 25(4), pages 613-626, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. John Gibson & David McKenzie & Steven Stillman, 2009. "The Impacts of International Migration on Remaining Household Members: Omnibus Results from a Migration Lottery Program," CReAM Discussion Paper Series 0920, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London. [Downloadable!]
    Other versions:
  2. McKenzie, David J., 2005. "Paper walls are easier to tear down : passport costs and legal barriers to emigration," Policy Research Working Paper Series 3783, The World Bank. [Downloadable!]
    Other versions:
  3. Ratha, Dilip & Mohapatra, Sanket & Plaza, Sonia, 2008. "Beyond aid : new sources and innovative mechanisms for financing development in Sub-Saharan Africa," Policy Research Working Paper Series 4609, The World Bank. [Downloadable!]
  4. David McKenzie & John Gibson & Steven Stillman, 2007. "Moving to Opportunity, Leaving Behind What? Evaluating the Initial Effects of a Migration Policy on Incomes and Poverty in Source Areas," Working Papers in Economics 07/23, University of Waikato, Department of Economics. [Downloadable!]
  5. Richard P.C. Brown & Eliana V. Jimenez, 2008. "A Mixed-Motives Model of Private Transfers with Subjectively-Assessed Recipient Need: Evidence from a Poor, Transfer-Dependent Economy," Discussion Papers Series 365, School of Economics, University of Queensland, Australia. [Downloadable!]
  6. John Gibson & David McKenzie, 2008. "Preliminary Impacts of a New Seasonal Work Program on Rural Household Incomes in the Pacific," Working Papers in Economics 08/18, University of Waikato, Department of Economics. [Downloadable!]
Statistics
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