IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v60y2017icp98-107.html
   My bibliography  Save this article

Transaction costs and recorded remittances in the post-Soviet economies: Evidence from a new dataset on bilateral flows

Author

Listed:
  • Kakhkharov, Jakhongir
  • Akimov, Alexandr
  • Rohde, Nicholas

Abstract

Labour migrants' remittances are a rapidly growing phenomenon in the countries of the former Soviet Union. The size and growth of remittances in the countries of the recipients brought the issue under the scrutiny of researchers and policymakers. In this paper we investigate the main factors behind the growing volume of remittances in the post-Soviet space. By applying panel data techniques we found that a reduction in transaction costs and a depreciation of the currency in the host country were the main factors that influenced the growth of recorded remittances. The size of transaction costs remains a significant predictor of the volume of formal remittances, even after correcting for endogeneity using an instrumental variable estimator. The inverse relationship between transaction costs and recorded remittances suggests that migrants switch from informal channels to formal channels to send remittances when costs are low. Thus lower transaction costs may help curb the proportion of informal flows and lead to increased use of remittances in the formal economy.

Suggested Citation

  • Kakhkharov, Jakhongir & Akimov, Alexandr & Rohde, Nicholas, 2017. "Transaction costs and recorded remittances in the post-Soviet economies: Evidence from a new dataset on bilateral flows," Economic Modelling, Elsevier, vol. 60(C), pages 98-107.
  • Handle: RePEc:eee:ecmode:v:60:y:2017:i:c:p:98-107
    DOI: 10.1016/j.econmod.2016.09.011
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999316304102
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ahamada, Ibrahim & Coulibaly, Dramane, 2011. "How does financial development influence the impact of remittances on growth volatility?," Economic Modelling, Elsevier, vol. 28(6), pages 2748-2760.
    2. Jorge Durand & William Kandel & Emilio Parrado & Douglas Massey, 1996. "International migration and development in mexican communities," Demography, Springer;Population Association of America (PAA), vol. 33(2), pages 249-264, May.
    3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    4. Coulibaly, Dramane, 2015. "Remittances and financial development in Sub-Saharan African countries: A system approach," Economic Modelling, Elsevier, vol. 45(C), pages 249-258.
    5. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    6. Lueth Erik & Ruiz-Arranz Marta, 2008. "Determinants of Bilateral Remittance Flows," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-23, October.
    7. Osman Tuncay Aydas & Kivilcim Metin-Ozcan & Bilin Neyapti, 2005. "Determinants of Workers' Remittances : The Case of Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(3), pages 53-69, May.
    8. Robert Shelburne & Jose Palacin, 2007. "Remittances in the CIS: Their Economic Implications and a New Estimation Procedure," ECE Discussion Papers Series 2007_5, UNECE.
    9. Chowdhury, Mamta B., 2011. "Remittances flow and financial development in Bangladesh," Economic Modelling, Elsevier, vol. 28(6), pages 2600-2608.
    10. Hathroubi, Salem & Aloui, Chaker, 2016. "On interactions between remittance outflows and Saudi Arabian macroeconomy: New evidence from wavelets," Economic Modelling, Elsevier, vol. 59(C), pages 32-45.
    11. Freund, Caroline & Spatafora, Nikola, 2008. "Remittances, transaction costs, and informality," Journal of Development Economics, Elsevier, vol. 86(2), pages 356-366, June.
    12. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, in: S. Kolm & Jean Mercier Ythier (ed.),Handbook of the Economics of Giving, Altruism and Reciprocity, edition 1, volume 1, chapter 17, pages 1135-1198, Elsevier.
    13. Bang, James T. & Mitra, Aniruddha & Wunnava, Phanindra V., 2016. "Do remittances improve income inequality? An instrumental variable quantile analysis of the Kenyan case," Economic Modelling, Elsevier, vol. 58(C), pages 394-402.
    14. Cragg, John G. & Donald, Stephen G., 1993. "Testing Identifiability and Specification in Instrumental Variable Models," Econometric Theory, Cambridge University Press, vol. 9(2), pages 222-240, April.
    15. Schrooten, Mechthild, 2005. "Bringing home the money: what determines worker's remittances to transition countries?," Discussion Paper Series a466, Institute of Economic Research, Hitotsubashi University.
    16. Adams Jr., Richard H., 2009. "The Determinants of International Remittances in Developing Countries," World Development, Elsevier, vol. 37(1), pages 93-103, January.
    17. Siegfried, Nikolaus & Schiopu, Ioana, 2006. "Determinants of workers' remittances: evidence from the European Neighbouring Region," Working Paper Series 688, European Central Bank.
    18. Mamun, Md. Al & Sohag, Kazi & Uddin, Gazi Salah & Shahbaz, Muhammad, 2015. "Remittance and domestic labor productivity: Evidence from remittance recipient countries," Economic Modelling, Elsevier, vol. 47(C), pages 207-218.
    19. Alkhathlan, Khalid A., 2013. "The nexus between remittance outflows and growth: A study of Saudi Arabia," Economic Modelling, Elsevier, vol. 33(C), pages 695-700.
    20. Schrooten, Mechthild, 2006. "Workers' Remittances to Former Soviet States," Discussion Paper Series a476, Institute of Economic Research, Hitotsubashi University.
    21. Lucas, Robert E B & Stark, Oded, 1985. "Motivations to Remit: Evidence from Botswana," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 901-918, October.
    22. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances; How Do Migrant Workers Respond to Cyclical Movements of GDP At Home?," IMF Working Papers 06/52, International Monetary Fund.
    23. Aggarwal, Reena & Demirgüç-Kunt, Asli & Pería, Maria Soledad Martínez, 2011. "Do remittances promote financial development?," Journal of Development Economics, Elsevier, vol. 96(2), pages 255-264, November.
    24. Cox, Donald & Jakubson, George, 1995. "The connection between public transfers and private interfamily transfers," Journal of Public Economics, Elsevier, vol. 57(1), pages 129-167, May.
    25. A. Akimov & B. Dollery, 2008. "Financial Policy in Transition Economies: Architecture, Pace, and Sequencing," Problems of Economic Transition, Taylor & Francis Journals, vol. 50(9), pages 6-26.
    26. Matloob Piracha & Amrita Saraogi, 2012. "The Determinants of Remittances: Evidence from Moldova," Oxford Development Studies, Taylor & Francis Journals, vol. 40(4), pages 467-491, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ahmed, Junaid & Mughal, Mazhar & Martínez-Zarzoso, Inmaculada, 2020. "Sending money home: Transaction cost and remittances to developing countries," Center for European, Governance and Economic Development Research Discussion Papers 387, University of Goettingen, Department of Economics.
    2. Jakhongir Kakhkharov, 2017. "Remittances and household investment in entrepreneurship: The case of Uzbekistan," Discussion Papers in Finance finance:201703, Griffith University, Department of Accounting, Finance and Economics.
    3. Denis Vitalyevich Krylov, 2019. "Analysis of the Sustainability of the ‘Pomogaistvo’ Institution," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 1, pages 170-184.
    4. Jakhongir Kakhkharov & Nicholas Rohde, 2020. "Remittances and financial development in transition economies," Empirical Economics, Springer, vol. 59(2), pages 731-763, August.
    5. Jakhongir Kakhkharov, 2018. "Remittances and financial development in transition economies," Discussion Papers in Finance finance:201803, Griffith University, Department of Accounting, Finance and Economics.
    6. László Kajdi, 2018. "Remittances – First Results of a New Survey," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 17(3), pages 85-108.
    7. Bettin, Giulia & Lucchetti, Riccardo & Pigini, Claudia, 2018. "A dynamic double hurdle model for remittances: evidence from Germany," Economic Modelling, Elsevier, vol. 73(C), pages 365-377.

    More about this item

    Keywords

    Remittances; Migration; Money transfer fees; Transition; Post-communist;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F30 - International Economics - - International Finance - - - General
    • P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:60:y:2017:i:c:p:98-107. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Haili He). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.