Exploring the Macroeconomic Drivers of International Bilateral Remittance Flows: A Gravity-Model Approach

Abstract

This paper investigates the macroeconomic determinants of global bilateral remittance flows. Unlike existing studies, which have been often hampered by the lack of comprehensive and large-enough datasets, we use data originally covering 214 countries over the 2010–2017 period. We employ a gravity-model approach to explore the role played by dyadic and country-specific covariates in explaining remittances. We find that remittance flows are robustly and strongly impacted by size effects (i.e., number of migrants in the host country and population at home), transaction costs, common social, political, and cultural ties, output growth rate, and financial development at home. We also document the existence of a robust non-linear relationship between per capita income at home and remittance flows, both in the aggregate and across income groups.