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 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.

Bibliographic Details

Main Authors:	Beck, Thorsten, Peria, Maria Soledad Martinez
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	2009-10-01
Subjects:	ACCESS TO FINANCIAL SERVICES, AVERAGE COSTS, AVERAGE REMITTANCE, BANK BRANCHES, BANK COMPETITION, BANK DATA, BANK PAYMENT, BANK POLICY, BANKING INDUSTRY, BANKING SECTOR, BANKING SECTORS, BANKING SERVICES, BANKS, BRAIN DRAIN, BULLETIN, BUSINESS FORMATION, CAPITAL ACCOUNT, CHILD HEALTH, CONSUMERS, COST OF REMITTANCE, COST OF REMITTANCES, COSTS OF REMITTANCES, CURRENCY, CURRENCY BOARDS, DEVELOPING COUNTRIES, DEVELOPMENT BANK, DEVELOPMENT ECONOMICS, DIASPORA, DUMMY VARIABLE, ECONOMIC CHARACTERISTICS, ECONOMIC DEVELOPMENT, ECONOMIC OUTLOOK, EDUCATED MIGRANTS, EDUCATION LEVEL, EDUCATIONAL ATTAINMENT, ELASTICITY, EMERGING MARKET, EMIGRATION, EXCHANGE RATE, EXCHANGE RATE REGIMES, EXPATRIATES, EXTERNAL FINANCING, FINANCIAL ACCESS, FINANCIAL DEVELOPMENT, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL INTERMEDIATION, FINANCIAL LITERACY, FINANCIAL SERVICES, FINANCIAL STRUCTURE, FLOWS OF REMITTANCES, FOREIGN DIRECT INVESTMENT, FOREIGN PENETRATION, FUTURE RESEARCH, GDP, GDP PER CAPITA, GLOBALIZATION, GOVERNMENT POLICIES, GROUP OF BANKS, HOUSEHOLDS, HUMAN CAPITAL, IMMIGRANTS, IMPACT OF REMITTANCES, IMPORTANCE OF REMITTANCES, INCOME, INCOME LEVELS, INCOMES, INDUSTRIAL ECONOMICS, INEQUALITY, INFANT, INFANT MORTALITY, INFORMAL CHANNELS, INFORMAL FLOWS, INFORMED CHOICES, INPUT PRICES, INTERNATIONAL BANK, INTERNATIONAL CONFERENCE ON MIGRATION, INTERNATIONAL MIGRATION, INTERNATIONAL MONEY TRANSFER, INTERNATIONAL MONEY TRANSFER OPERATORS, INVESTMENT FLOWS, LEGAL TENDER, LEVEL OF EDUCATION, LEVY, MARGINAL COSTS, MARGINAL PRODUCT, MARKET PLAYERS, MARKET SHARE, MARKET SHARES, MARKET STRUCTURE, MICROENTERPRISES, MIGRANT, MIGRANT REMITTANCES, MIGRANTS, MONEY TRANSFER, MONEY TRANSFER OPERATORS, MONOPOLISTIC COMPETITION, MONOPOLY, NUMBER OF MIGRANTS, PAYMENT SYSTEM, PAYMENT SYSTEMS, PERFECT COMPETITION, POLICY MAKERS, POLICY RESEARCH, POLICY RESEARCH WORKING PAPER, POPULATION DENSITY, POST OFFICES, PROGRESS, RECIPIENT COUNTRY, REGULATORY FRAMEWORK, REMITTANCE, REMITTANCE BUSINESS, REMITTANCE COSTS, REMITTANCE INDUSTRY, REMITTANCE MARKET, REMITTANCE PROVIDERS, REMITTANCE RECEIVING, REMITTANCE SENDERS, REMITTANCE SENDING, REMITTANCE SENDING COUNTRIES, REMITTANCE SERVICE, REMITTANCE SERVICE PROVIDERS, REMITTANCE SERVICES, REMITTANCE TRANSACTION, REMITTANCE TRANSACTIONS, REMITTANCES, REMITTANCES FLOWS, RESPECT, RURAL AREAS, RURAL POPULATION, SERVICE DELIVERY, SERVICE PROVIDER, SERVICE PROVIDERS, SOCIAL SCIENCE, TAX, TERTIARY EDUCATION, TRANSACTION COSTS, UNION,
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
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