Benford's Law and the Measurement of Remittances

Remittances are crucial for countries' economic development. Credible data on such financial flows are essential for examining questions related to their determinants and impacts. However, they are potentially under‐reported. Using data from over 210 countries during 1970–2023, we rely on Benford's Law and calibrated simulations to assess the reliability of country‐level data on remittances. Statistical tests often find the variable's leading digit's probability distribution to differ significantly from that posited by the law. This nonconformity is partly attributable to high transaction costs and the availability of informal channels. A simulation exercise finds average misreporting between 3% and 10% as plausible.