The Impact of Transaction Fees on Migrant Remittances: Evidence from a Field Experiment Among Migrants from El Salvador

The Impact of Transaction Fees on Migrant Remittances: Evidence from a Field Experiment Among Migrants from El Salvador

7 July, 2020    

The remittances that migrants send to their home countries are one of the largest international financial flows to the developing world. A common policy recommendation is that remittance transaction fees should be lowered. This paper provides the first empirical evidence on the causal impact of remittance transaction fees on remittance flows via a field experiment among migrants from El Salvador in the Washington D.C. area. In partnership with a local money transmitter, we randomly assigned migrants differently-sized discounts on remittance transaction fees. Reductions in remittance fees led to large increases in remittances sent to the migrant’s home country. A $1 reduction in fees led migrants to send $25 more remittances per month via our partner institution. Increases in remittances occurred via increases in the frequency of transactions, and not on funds sent per transaction. There is no evidence that this increase in remittances represents shifting of funds previously sent via other remittance channels, funds sent on behalf of others, or intertemporal substitution of funds that would have been sent later.

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