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

Jakhongir Kakhkharov, Alexandr Akimov, Nicholas Rohde

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)98-107
Number of pages10
JournalEconomic Modelling
Volume60
DOIs
Publication statusPublished - Jan 2017
Externally publishedYes

Keywords

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

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