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Neighbouring countries and bilateral remittances: a global study

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  • Thibault Laurent
  • Paula Margaretic
  • Christine Thomas-Agnan

Abstract

We measure to what extent neighbouring countries affect the amount of remittances between a source and a recipient country, controlling for the commonly used macro determinants of remittances. We provide novel evidence on the importance of neighbouring countries, with the parameter estimates capturing origin and destination spatial dependence being positive and significant. Disregarding the role of neighbouring countries leads to biased estimates and misprediction. Indeed, when we correctly account for the role of neighbouring countries, prediction errors decrease by 44% when we express bilateral remittances in nominal terms and by 31% when remittances are in logarithm. Next, we present evidence supporting the altruism, the investment and the financial friction motives to remit, with the altruism motive being the one that contributes the most to explain expected remittances. As an application of our model, we show that, following the Covid-19 shock, remittances are expected to decrease less in countries with smaller income per capita. This is good news for low- to middle-income countries.

Suggested Citation

  • Thibault Laurent & Paula Margaretic & Christine Thomas-Agnan, 2022. "Neighbouring countries and bilateral remittances: a global study," Spatial Economic Analysis, Taylor & Francis Journals, vol. 17(4), pages 557-584, October.
    • Handle: RePEc:taf:specan:v:17:y:2022:i:4:p:557-584
    DOI: 10.1080/17421772.2022.2070656
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    Cited by:

    1. Angana Parashar SARMA & Muniyor KRISHNA, 2024. "Causal Nexus Between Remittance Inflow And Its Determinants, 1998-2020: Evidence From The South And Southeast Asian Lmics," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 24(1), pages 97-120.

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