Show Me the Money: Four Essays on Remittance Transfer Costs, Channel Modality, and Informal Finance Gaps

Abstract

Remittances, defined as funds sent by migrants to recipients in their region of origin or other transnational diaspora members, constitute a substantial portion of global financial flows. Regrettably, there exist sparse estimates regarding the volume and characteristics of informal remittances. If informal channels, such as hand-carried cash across borders, undeclared goods, and other transfers were accounted for, literature suggests that total flows would be substantially larger than currently reported. Policymakers have endorsed various initiatives, namely transfer cost reduction policies, by committing to targets and spurring competition to formalise informal flows. Divided into two main parts, each consisting of two papers or chapters, this dissertation explores topics in remittance behaviour, channel modality (or channel choice), and formalisation policies. In the first part, the dissertation explores the Canadian case study of the micro effects of transfer costs on remittance choices and channel modality using household survey data. As such, the first two papers explore the micro-level factors underlying remittance decision making. The first paper studies the micro-determinants, namely transfer costs, on the propensity to remit and the simultaneous decisions of the amount and frequency with which to remit. The second paper's analysis expands upon Canadian remitters' case study and unpacks the dichotomisation of formal versus informal methods to delve deeper into channel modality at the migrant and household levels. The second part of the dissertation broadens the scope of analysis to a global scale. The third paper delves into policy analysis and international relations theory to analyse the causal pathways that explain how the 2001 9/11 attacks shaped modern formalisation policies. The fourth paper builds upon this policy shift to study the slowdown in global formal remittance growth. Via proxy estimations of the informal sector, results indicate that while formalisation has contributed to the growth in formal remittances, formalisation efforts yield diminishing marginal returns over time. The multi-levelled approach across micro and macro chapters provides a holistic understanding of the gaps in each level of analysis and sheds light on the still liminal literature on remittance modality and formalisation.