What Explains the Cost of Remittances? An Examination across 119 Country Corridor
Remittances are a sizeable source of external financing for developing countries. In the L Aquila 2009 G8 Summit, leaders pledged to reduce the cost of remittances by half in 5 years (from 10 to 5 percent). Yet, empirically, little is known about w...
| Main Authors: | , |
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| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091013142843 http://hdl.handle.net/10986/4264 |
| Summary: | Remittances are a sizeable source of
external financing for developing countries. In the L Aquila
2009 G8 Summit, leaders pledged to reduce the cost of
remittances by half in 5 years (from 10 to 5 percent). Yet,
empirically, little is known about what drives the cost of
remittances. Using newly gathered data across 119 country
corridors, this paper explores the factors that determine
the cost of remittances. Considering average costs across
all types of institutions, the authors find that corridors
with larger numbers of migrants and more competition among
remittances service providers exhibit lower costs. By
contrast, remittance costs are higher in richer corridors
and in corridors with greater bank participation in the
remittances market. Comparing results across all banks and
all money transfer operators separately, the analysis finds
few significant differences. However, estimations for
Western Union, a leading player in the remittances business,
suggest that this firm s prices are insensitive to competition. |
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