The Forgotten Transfer - A Microeconomic Perspective on the Relevance of Educational Level for Selection of Transaction Channel for Domestic EU Remittances

Abstract: Up until today, academic research in the area of domestic remittances has been overshadowed by research on the globally far more recognized concept of international remittances. The abundance of research has furthermore focused on elucidating potential net benefits and drawbacks’ stemming from these financial flows, without much emphasis on selection of transaction channels. There are, however, several reasons as to why this area should not be neglected given its interconnectedness with harvesting benefits and the general governmental interest to promote the usage of formal channels which are more easily monitored and can be regulated to prevent remittances being used for illegal purposes. European research on remittances has furthermore often been linked to migration and outflows to developing countries and analysis on domestic transfers on individual level is scarce. This thesis therefore aims to give new insight, from a EU perspective, in the sector of domestic remittances and individual-level motivators behind preference of a certain method for the transaction. Given identified linkages between educational level and selection of channel in the few existing previous studies, the thesis examines if the identified correlation holds also for domestic remittances while controlling for other potentially influential variables. Based on the results from a multinomial logistic regression on aggregated micro level data from 11 EU member states, the approximated relationship where a higher level of education increases the likelihood of a remitter selecting a formal transaction channel over an informal holds up for domestic remittance flows. The results further approximate significant predictions for the transaction channel selection from other variables such as age of the remitter.