Are remittances a source of finance for private adaptation strategy? Evidence from a natural experiment in the Cyclone Sidr hit regions of southern Bangladesh

Sakib Mahmud () and Gazi Hassan ()

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

Abstract: We model household responses to storm protection actions in an endogenous risk framework and then test the predictions based on a recently concluded survey from southern Bangladesh hit by the category-5 Cyclone-Sidr in 2007. Households decide on the margin how to finance private adaptive expenditures and foreign remittances come into play a pivotal role in shaping private adaptive behaviour. For our empirical analysis, we use IV method to harness a random assignment of treatment of remittances by exploiting a natural shock wherein some households suffered damages from another second Cyclone-Roanu in the same area just prior to the survey period in 2016. Using natural experiment as an identification strategy, we find that for every 1,000 Taka increase in remittances receipts, private adaptive expenditures increase by 20.95 Taka. The IV results are generalizable because the control and treatment groups do not differ in their pretreatment observable characteristics.

Keywords: Remittances; private adaptive expenditure; endogenous risk; storm protection behavior; Cyclone Sidr; Cyclone Roanu; climate change; Bangladesh. (search for similar items in EconPapers)
JEL-codes: D03 O12 Q54 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2018-12
New Economics Papers: this item is included in nep-dev
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2018-61

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