THE COST OF SENDING MONEY BACK HOME: AN ANALYSIS OF MIGRANT-SKILL LEVEL AND INFORMAL REMITTANCE FLOWS

Abstract

While scholars have studied various aspects of the increasingly popular topic of remittances, from developmental impacts to individual motivations, there is little research on the significant, yet elusive category of informal remittance flows. This study aims to fill some of the gaps in the existing literature by emphasizing how variation in the skill levels of migrants affect their decision to remit informally. I theorize and empirically demonstrate that informal remittances are negatively correlated with skill level: high-skill workers are less likely to remit informally than low-skill migrants. The empirics employ multi-methods including a cross-sectional dataset of nearly 70 countries, a sub-set of remittance dependent countries, and a set of interviews of remitting migrants. My findings can be attributed to differing cost-benefit analysis calculations for both groups of migrants. Overall, these findings in conjunction with a case study of actions taken by the Pakistan government lead to the conclusion that targeted focus on low-skill migrant remitting populations can help countries convert valuable capital from informal to formal flows.