Remittances,transaction costs,and informality

Recorded workers' remittances to developing countries reached $167 billion in 2005, bringing increasing attention to these flows as a potential tool for development. In this paper, we explore the determinants of remittances and their associated transaction costs. We find that recorded remittances depend positively on the stock of migrants and negatively on transfer costs and exchange rate restrictions. In turn, transfer costs are lower when financial systems are more developed and exchange rates less volatile. The negative impact of transactions costs on remittances suggests that migrants either refrain from sending money home or else remit through informal channels when costs are high. We provide evidence from household surveys supportive of a sizeable informal sector.     

More distance,more remittance? Remitting behavior,travel cost,and the size of the informal channel

The rising number of foreign workers in Italy during the last 15 years has led to a conspicuous increase in the amount of remittances sent abroad. In this paper, we examine the determinants of remittance outflows originated in Italy and transferred abroad through registered financial intermediaries. After controlling for a wide set of socioeconomic regressors, we document a strong positive relation between remittances and the cost of travel between Italy and the migrants' respective home countries. We interpret this result as indirect evidence of unrecorded flows, since the relation between remittances and travel cost should be non‐significant unless geographical proximity permits remitters to switch to informal (non‐observable) transmission mechanisms. Moreover, using data on temporal and monetary costs for a subset of bilateral corridors, we also find remittances to be negatively correlated with high transaction costs and low speed of transfer. We rely on this empirical evidence and on a model of migrants' remitting behavior to present new strategies for estimating the size of the informal outflow.     

Deposit insurance,remittances, and dollarization: Survey‐based evidence from a top remittance‐receiving country

The study uses a unique survey of remittance‐receiving individuals from Tajikistan to study the impact of policy awareness on consumer behavior. The results show that knowledge of deposit insurance encourages the use of formal channels for transmitting remittances and reduces dollarization. Given the size and importance of remittances in Tajikistan, improving financial literacy and better publicizing details of the social safety net may encourage a more frequent use of formal channels for transferring remittances and reduce reliance on foreign exchange for transaction purposes. This is likely to improve bank profitability, enhance financial stability, and improve access to finance.     

Regulation of entry, labor market institutions and the informal sector

This paper develops a two-sector matching model that incorporates the main features of Latin American labor markets. It has an innovation in its matching structure that makes it more consistent with some key stylized facts of the informal sector in these countries. The model is numerically solved using Brazilian data and several policy simulations are performed. Reducing formal sector's entry cost significantly reduces the size of the informal sector and improves overall labor market performance. Increasing enforcement significantly reduces informality but has strong adverse effects on unemployment and welfare. Thus, the results indicate that the tradeoff between lower informal employment and higher unemployment rates is not present when one looks at policies that aim at reducing the costs of being formal, as opposed to policies that simply increase the costs of being informal.     

Revisiting the Effects of Remittances on Bank Credit: A Macro Perspective

We investigate the effect of remittances on bank credit in developing countries. Understanding this link is important in view of the growing relevance of remittances as a source of external finance and of the beneficial impact that financial intermediation is likely to have on economic growth. Our contribution is twofold. First, we present a theoretical model of bank credit in a hypothetical remittances‐receiving country where: (1) the banking sector is imperfectly competitive; and (2) bank rates change infrequently because of the presence of adjustment costs. We show that in equilibrium, the relationship between remittances and bank‐credit is likely to be non‐linear. Second, we look at the evidence using a panel data set for a large group of developing and emerging economies over the period 1970–2009. We find that at initially low levels of remittances, an increase in remittances reduces the volume of credit extended by banks. However, at sufficiently high levels of remittances, the effect becomes positive. The turning point of the relationship occurs at a level of remittances of about 2.5% of GDP, which would imply that approximately 50% of our sample lies to each side of this threshold.     

Start up costs, limited enforcement, and the hidden economy

This paper examines how much of the difference in the size of the informal sector and in per capita income across countries can be accounted by regulation costs and enforcement of financial contracts. It constructs and solves numerically a general equilibrium model with credit constrained heterogenous agents, occupational choices over formal and informal businesses, financial frictions and a government sector which imposes taxes and regulations on formal firms. The benefit from formalization is better access to outside finance. The quantitative exercises suggest that: (i) regulation costs and not the level of enforcement account for differences in the size of the informal sector between United States and Mediterranean Europe; (ii) for a developing country like Peru, however, contract enforcement and regulation costs are equally important in accounting for the size of the informal sector; and (iii) regulation costs and contract enforcement do not account for most of the income differences observed among countries.     

The nexus of economic and institutional evolution

The current state of the development economics literature ascribes an indisputable central role to institutions. This paper presents a formal model of institutional evolution that is based on the dynamic interactions between formal and informal institutions and economic development; the main features of the model is consistent with the fundamental theories that shed light to institutional evolution, namely the collective action and transaction cost theories, as well as dialectics. As informal institutional quality accumulates like technological know-how, while the level of formal institutional quality is chosen by the government to maximize welfare, subject to the economic and political costs. The solution of the model yields a punctuated trajectory of formal institutional evolution. Simulations reveal that the extent of diversity in informal institutional quality across a country delays formal institutional reforms. We also observe that, both the optimal quality of formal institutions and welfare are higher the more homogeneous is the country with respect to its informal institutions or the cultural attributes.     

我国农村民间金融高利率解释:一个交易成本的视角

我国是正规金融与民间金融共存的二元金融格局。农村民间金融利率高于正规金融利率是不争的事实。为了解释这个市场配置之谜,文章从交易成本的视角分析认为,我国农村正规金融对农村民间金融高利率水平影响深远,而且正是搜寻成本、谈判成本和监督执行成本高昂推高了农村民间金融利率,并在此基础上,提出有效降低这些交易成本的建议。     

农村非正规金融的微观机理与政策测度:国外文献评述

通过对国外文献关于农村非正规金融问题的研究进行概览,本文发现,农村非正规金融不仅能够降低农户借贷的外生交易费用,还能够降低制度性的内生交易费用;农村非正规金融自发生成的各种内在机制具有较高的制度效率,农村非正规金融可以与农村正规金融共存;以家庭为结点的社区网络是农村非正规金融私人治理机制的基础;为了缓解农户贷款难的问题,由发展中国家政府推出的各种扶贫项目的作用却很有限,因而政府要想有效干预农村金融市场,就必须考虑并充分利用农村非正规金融的作用。但已有研究并未定量分析农村非正规金融与正规金融之间的复杂关系,鲜有文献计量农村非正规金融的经济增长效应;相关的理论研究比较零散,尚未形成一致的理论框架。这就为进一步的研究指明了可选方向。     

The dynamics of parallel economies. Measuring the informal sector in Mexico

The existence of parallel economies that operate in the shadows of informality within most Latin American countries is widely recognized by the economic literature. However, its composition, size and effects on economic growth are still open questions. In this paper, we estimate the size and the evolution of the Mexican informal economy in the last three decades using a vector error correction model. In addition to the standard explanatory variables traditionally used in the currency demand approach, we include remittances given their relevance in the Mexican economic system. The results indicate that informality prior to the late 1980s accounted for at least two thirds of GDP, while stabilizing around one third of GDP in the last decade. Furthermore, our estimates provide evidence of a positive long-run relationship between informality and economic growth.     

国际制度的形式选择——一个基于国家间交易成本的模型

根据制度化水平的三个维度,国际制度安排的基本形式可分为非正式协议、自我实施的正式协议、一般的正式国际组织和超国家组织。那么,缔约国如何在上述国际制度安排形式之间进行选择?本文尝试从国家间交易成本的角度为这一问题提供一个解释模型。国家间交易成本包括国家间治理成本与国家间缔约成本两个部分。国家间治理成本随着制度化水平的提高而递减,国家间缔约成本随着制度化水平的提高而递增。缔约国在选择国际制度安排形式时,将在国家间治理成本与国家间缔约成本之间进行权衡。作为理性的国际行为主体,缔约国在交易收益给定的情况下,将选择使国家间交易成本最小化的国际制度安排形式。根据这一制度选择模型,本文进一步提出了分别涉及问题领域敏感性、国家同质性、透明度、资产专用性、不确定性和交易频率的六个假说。     

Quality and Inclusion of Producers in Value Chains: A Theoretical Note

This paper develops a formal theory of the endogenous process of the introduction of high quality production in developing countries. Initial differences in income and capital and transaction costs are shown to affect the emergence of and the size of the high quality economy. Initial differences in the production structure and the nature of transaction costs—as well as the possibility of contracting between producers and processors—are shown to determine which producers are included in the high quality economy, and which not.     

Factors that influence transaction costs in development offsets: Who bears what and why?

Environmental policy instruments generate transaction costs to public and private parties. There is a growing literature reporting on the size of transaction costs produced by environmental policy instruments. This paper extends that literature through an analysis of the factors that influence transaction costs in environmental policy and how this influence occurs. The theory based factors that influence transaction costs are categorised as: 1) transaction characteristics; 2) transactor characteristics; 3) nature of the institutional environment; and 4) nature of the institutional arrangements. We examined how these factors influenced transaction costs through the analysis of two Australian-based development offset schemes with different policy designs. We found evidence of all four theory-based categories of influence in the policy case studies. The degree of influence and how each factor influenced transaction costs varies across the two policies and between parties. Policy design as a component of the institutional environment had a particularly large bearing on transaction costs of offset buyers and the policy administrator. An important contribution to transaction cost theory assumes the institutional environment as given.     

Access to capital in rural Thailand: An estimated model of formal vs. informal credit

This paper analyzes the mechanism underlying access to credit, focusing on two important aspects of rural credit markets. First, moneylenders and other informal lenders coexist with formal lending institutions such as government or commercial banks, and, more recently, micro-lending institutions. Second, potential borrowers presumably face sizable transaction costs in obtaining external credit. We develop and estimate a model based on limited enforcement and transaction costs that provides a unified view of these facts. Based on data from Thailand, the results show that the limited ability of banks to enforce contracts, more than transaction costs, is crucial in understanding the observed diversity of lenders.     

Fiscal policy in a small open economy with cross-border labor mobility

The large and stable inflow of workers’ remittances through formal financial channels to developing countries prompted authorities to harness fiscal resources from this flow. This paper develops a macro-dynamic model of a small open economy with cross-border labor mobility emphasizing fiscal policy. The flow of remittances is the result of a household’s optimizing decision to migrate. We examine the macroeconomic responses to fiscal policies. First, we show that an economy with international migration is more resilient to demand shocks resulting from fiscal contraction. Second, the short-run association between remittances and domestic output depends on the sources of the shocks. Third, our results indicate that the equilibrium impact of a tax on remittances can be expansionary and welfare-improving when an economy is initially close to full employment. The presence of utility-enhancing government expenditure and a potential negative externality from over-allocation of labor abroad (over migration) justify the presence of distortionary taxes.     

Revisiting the threshold effect of remittances on total factor productivity growth in South Asia: a study of Bangladesh and India

Both Bangladesh and India are among the top recipient of remittances in absolute terms. However, in relative terms – remittances as a per cent of GDP – the two countries stand at 6.1% and 2.8%, respectively, well below the levels of the top 10 recipients. In this article, we explore the effect of remittances on the total factor productivity (TFP) growth considering Bangladesh and India, as reference countries over the periods 1980–2012 and 1977–2012, respectively. We examine the presence of a long-run association between remittances and TFP using a number of tests. The results indicate that remittances have threshold effects on TFP growth in both countries. Despite the two countries receiving substantial amount of remittances, we note that Bangladesh has a U-shaped relationship whereas India has an inverted U-shaped relationship with TFP growth. For Bangladesh, a minimum threshold of remittances (% GDP) is 5.3% and for India, a tipping point of remittances (% GDP) is at 1.8%. The causality tests confirm a bidirectional effect, which implies that remittances and TFP growth are mutually reinforcing. Interestingly, while the two economies have similar remittances impact in regards to causality, the study highlights two different tipping points of remittances.     

Public external debt,informality and production efficiency in developing countries

This paper proposes an alternative approach to investigate the non-linear effect of external debt on growth. In the theoretical part, we develop an endogenous growth model with formal and informal sectors to analyse the effect of the public external debt on the production efficiency. We show that an increase of the public external debt share increases the production efficiency through a positive externality effect. However, it generates an opposite effect via the reduction of the formal sector’s size in favour of a less efficient informal sector. The resultant effect becomes negative beyond an optimal level. Besides, we show that a large stock of public external debt reduces the production efficiency when it leads to a tight fiscal policy which reduces the formal sector size. Empirically, using a stochastic frontier technique with unobserved heterogeneity, for a panel of 27 developing countries for the period of 1970–2005, we confirm that the turning point associated to the effect of the share external public debt is apparent at 84%.     

FDI,Foreign Aid,Remittance and Economic Growth in Developing Countries

Using a dynamic spatial framework, this paper investigates how foreign direct investment (FDI), foreign aid and remittances impact the economic growth of 53 African and 34 Latin American and Caribbean countries. Previous growth studies examine how one factor or two of these factors impacts economic growth, which results in biased estimation because of the omitted variable(s). Separate estimation shows foreign aid and FDI affects economic growth in Africa, but when we control for all three factors, only FDI affects African economic growth. For Latin America and the Caribbean, foreign aid and remittances affect growth when estimated separately, while remittances affect growth when they are estimated simultaneously. Finally, both regions' results confirm spatial interdependence is important in explaining economic growth, as growth in one country depends on the growth of its neighboring countries.     

Migration and employment interactions in a crisis context

This article analyses how a crisis impacts labour markets in origin countries through migration channels. For this purpose, we develop a novel dynamic general equilibrium model with a focus on the interlinkages between migration, the labour market and education. The main innovation of the paper is the retrospective modelling in general equilibrium of the impact of an economic crisis to isolate the impact of migration on local unemployment. The impact of the crisis on education decision is captured through endogenous returns to education. The simultaneity of the crisis in Tunisia and its partners worsened the labour market situation mainly through the increase in labour supply. The main result of this study is that migration is indeed one of the main determinants of the unemployment increase and that remittances have a higher impact than the variation of emigration flows. The low skilled bear the highest costs in terms of unemployment and wage decline.     

正式制度与非正式制度如何驱动社会创业——基于效率驱动型国家的QCA研究

社会创业已成为解决社会问题的重要手段,然而对于如何驱动社会创业尚未有定论。以23个效率驱动型国家为研究样本,整合正式制度与非正式制度的5个前因条件,应用QCA方法,探讨了影响国家社会创业活跃度的多重并发因素与复杂因果机制。研究发现：①高社会创业活跃度的驱动机制分为两条路径,即政策-规范-价值观型和规范-价值观-教育型。第一条路径是正式制度与非正式制度要素间的联动匹配,第二条路径是非正式制度要素间的联动匹配;②非正式制度在影响人们社会创业选择时具有重要作用,影响程度甚至超过了正式制度;③政府政策与创业教育之间具有替代作用,即当社会规范与文化价值观水平较高时,只要拥有完善的政府政策,或者良好的创业教育,就能驱动形成较高的社会创业活跃度;④非高社会创业活跃度的驱动机制分为4条路径,且与高社会创业活跃度的驱动路径存在非对称性关系。