Climate Hazards and the Health-Remittance Trade-off: Experimental Evidence from Rural Bangladesh

Gazi Hassan ()

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper develops a novel theoretical and empirical framework to examine how climate vulnerability moderates the impact of international remittances on household health expenditures. While remittances are traditionally viewed as a financial lifeline for improving health and education in low-income settings, this study theorizes and demonstrates that climate-induced adaptation costs may attenuate their effectiveness in financing healthcare. A dynamic stochastic optimization model predicts that climate vulnerability introduces trade-offs in household budgeting, reducing the marginal effect of remittances on health investments. Empirically, the study exploits a natural experiment in southern Bangladesh, where rainfall variability and exposure to Cyclone Roanu create exogenous variation in remittance flows. An instrumental variable strategy—using rainfall deviations interacted with household proximity to weather stations—enables causal identification. Results show that remittances increase health expenditures by 0.24 Taka per Taka received in low-vulnerability households, but this effect diminishes by 0.10 Taka for every standard deviation increase in climate vulnerability. These findings are robust to alternative instruments, controls for adaptation expenditure, and exclusion restriction tests. The study contributes to migration, climate, and health finance literature by highlighting that remittance benefits are conditional—not absolute—in climate-vulnerable settings. Policy responses should integrate climate resilience into remittance-supported health financing frameworks.

Keywords: remittances; health expenditures; climate vulnerability; natural experiment; instrumental variable estimation; dynamic stochastic optimization (search for similar items in EconPapers)
JEL-codes: F24 I15 Q54 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2025-05
New Economics Papers: this item is included in nep-ain, nep-big, nep-cba and nep-mon
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https://crawford.anu.edu.au/sites/default/files/2025-05/26_2025_Hassan.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2025-26

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