‘From aspirations for climate action to the reality of climate disasters’: Can remittances play key role in disaster response?

Farid Makhlouf and Refk Selmi

The World Economy, 2024, vol. 47, issue 8, 3487-3510

Abstract: Climate change and extreme weather events have led to a surge in natural hazards in Pakistan that have escalated into humanitarian disasters. While remittances are often central to the livelihood of the most vulnerable, research has produced limited knowledge regarding the role of remittances in time of disaster. This paper investigates the reaction of Pakistani migrants to five major natural disasters via remittances from 1972 to 2023. Using an event‐study methodology, the paper compares the responses of remittances in different host countries namely Gulf Cooperation Council (GCC), Europe & the UK and North America. We provide evidence that remittances intensify in response to climate‐induced disasters, thus representing a reactive mechanism in time of hardship. The response is significant two (one) months after the events for GCC (Europe & the UK and North America) and tends to dissipate 5 months from the disaster occurrence (except for GCC). The intensity and the persistence of remittances' responsiveness (abnormal returns and volatility) depends on the nature of disasters, host countries’ features and the economic conditions of migrants. Our findings highlight the need for further understanding the role of remittances as a coping mechanism in the face of environmental hazards to better inform policies geared toward disaster risk reduction.

Date: 2024
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