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

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  • Giorgio Fagiolo

    (Istituto di Economia, Scuola Superiore Sant’Anna, 56127 Pisa, Italy)

  • Tommaso Rughi

    (Istituto di Economia, Scuola Superiore Sant’Anna, 56127 Pisa, Italy)

Abstract

This paper investigates the macroeconomic determinants of global bilateral remittance flows. Unlike existing studies, which have been often hampered by the lack of comprehensive and large-enough datasets, we use data originally covering 214 countries over the 2010–2017 period. We employ a gravity-model approach to explore the role played 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 groups.

Suggested Citation

  • Giorgio Fagiolo & Tommaso Rughi, 2023. "Exploring the Macroeconomic Drivers of International Bilateral Remittance Flows: A Gravity-Model Approach," Economies, MDPI, vol. 11(7), pages 1-27, July.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:7:p:195-:d:1196168
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    References listed on IDEAS

    as
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    3. Posso Alberto, 2015. "Remittances and financial institutions: is there a causal linkage?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 769-789, July.
    4. Michel Beine & Simone Bertoli & Jesús Fernández-Huertas Moraga, 2016. "A Practitioners’ Guide to Gravity Models of International Migration," The World Economy, Wiley Blackwell, vol. 39(4), pages 496-512, April.
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    7. Harach, Monika & Rodriguez-Crespo, Ernesto, 2014. "Foreign direct investment and trade: A bi-directional gravity approach," Kiel Advanced Studies Working Papers 467, Kiel Institute for the World Economy (IfW Kiel).
    8. Michel Beine & Simone Bertoli & Jesús Fernández-Huertas Moraga, 2016. "A Practitioners’ Guide to Gravity Models of International Migration," The World Economy, Wiley Blackwell, vol. 39(4), pages 496-512, April.
    9. Robert Reed & Christina Lira & Lee Byung‐Ki & Junsoo Lee, 2016. "Free Trade Agreements and Foreign Direct Investment: The Role of Endogeneity and Dynamics," Southern Economic Journal, John Wiley & Sons, vol. 83(1), pages 176-201, July.
    Full references (including those not matched with items on IDEAS)

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