Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296819 
Year of Publication: 
2024
Series/Report no.: 
ADBI Working Paper No. 1427
Publisher: 
Asian Development Bank Institute (ADBI), Tokyo
Abstract: 
The background of high remittance costs and countermeasures against the issue has drawn the attention of policymakers in the Pacific island countries in maximizing the benefits of migration and remittances on their economic development. We use a newly collected household survey about temporary migration in the region and implement a data audit on remittance costs to examine the current state of the remittance market and household decision-making around remittance channels in Tonga. We find that the household choice of remittance channels leads to a higher remittance cost because a large gap in remittance costs exists between high-cost and low-cost remittance service providers. Tongan workers choose high-cost providers mainly because of their ease of use. Within this context, Tongan households and the economy can gain more than 2% of remittances by switching to the lowest-cost providers. We also find that exposure to new information thanks to migration experiences, frequent remittances, and residential islands are the key household characteristics to voluntarily shift from cash transfers to online transfers or mobile money. The findings indicate that micro-level intervention on the household choice of remittance channels and providers can potentially contribute to reducing remittance costs in the region, but we first need to identify the barrier to switching to low-cost providers to design effective policy interventions.
Subjects: 
remittance costs
migration
Tonga
JEL: 
F24
O15
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Working Paper

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