Abstract
Macro- and microeconomic evidence suggests a positive role of remittances in preparing households against natural disasters and in coping with the loss afterward. Analysis of cross-country macroeconomic data shows that remittances increase in the aftermath of natural disasters in countries that have a larger number of migrants abroad. Analysis of household survey data in Bangladesh shows that per capita consumption was higher in remittance-receiving households than in others after the 1998 flood. Ethiopian households that receive international remittances seem to rely more on cash reserves and less on selling household assets or livestock to cope with drought. In Burkina Faso and Ghana, international remittance-receiving households, especially those receiving remittances from high-income developed countries, tend to have housing built of concrete rather than mud and greater access to communication equipment, suggesting that they are better prepared against natural disasters.
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Notes
There are about 200 million international migrants. A large share of these international migrants or about 156 million people are from developing countries (Ratha and Shaw 2007). Migrants from developing countries sent home an estimated $305 billion in officially recorded remittances in 2008, with these flows larger than official aid and foreign direct investment in many developing countries.
Such income shocks may be factored in the inter-temporal consumption and remitting decisions.
However, Yang (2007) shows for El Salvador that idiosyncratic shocks to the household such as death of a household member increase the likelihood of emigration, while covariate shocks such as earthquakes, where the entire population is affected, can even reduce emigration.
Furthermore, if migration and remittance decisions are undertaken as a part of the overall coping strategy by households in disaster prone regions, we may not necessarily observe a marked increase in remittances in the wake of slow onset disaster event such as drought since remittances are factored into the inter-temporal consumption decisions and will not change much unless there is an idiosyncratic shock.
However, it is possible that the loss of the most able household members who migrate may make it difficult for the remaining household members to cope with shocks including natural disasters.
In-kind remittances, especially from domestic migrants, are important in many countries, but there is very little reliable data on these. The reported values of remittances from the household surveys include in-kind remittances to some extent.
The Hyogo framework (www.unisdr.org/eng/hfa/hfa.htm) recognizes the importance of integrating disaster concerns in the larger context of development and vulnerability reduction.
For example, these include green houses for horticulture that can be easily disassembled and reassembled before and after hurricanes (UN News Center “To Succeed, Disaster Management Strategies Must Target, Reduce Inequalities, Vulnerabilities Faced By Poor, UN Economic and Social Council told.” 16 July, 2008 (http://www.un.org/News/Press/docs/2008/ecosoc6363.doc.htm)).
There is some evidence from a related literature on household coping strategies that receiving additional income may reduce ex-ante vulnerability. Udry (1994) finds for a sample of rural households in northern Nigeria that households facing increased weather variability deplete grain inventories at a slower rate to cope with the possibility of income shocks due to weather fluctuations. In a similar work, Paxson (1992) finds for a sample of rural farmers in Thailand that farm households experiencing rainfall shocks save a significantly larger portion of transitory agricultural income in order smooth consumption from income fluctuations. In another study, Rosenzweig and Wolpin (1993) show that farmers in India are more apt to sell bullocks when they experience income shocks.
The Center for Research on the Epidemiology of Diseases (CRED) has collected and made publically available data on the occurrence and effects of natural disasters from 1900 to the present with a worldwide coverage. The database is compiled from various sources, including UN agencies, non-governmental organizations, insurance companies, research institutions and press agencies. The EM-DAT data is publicly available on CRED's web site at: www.cred.be.
That would imply a marginal propensity of consumption of 62% out of additional remittances (since the estimated increase in consumption above is the average increase for the matched sample which includes households that don’t receive any remittances). This appears to be lower than the average propensity to consume likely because of the use of remittances for reconstruction after the flood.
However, among the “urban” households that receive remittances, 16% report being engaged in agricultural or related activities.
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Acknowledgments
We are grateful to Apurva Sanghi, Dean Yang, Saroj Kumar Jha, Mirafe Marcos, S. Ramachandran, and especially to the anonymous referees, for their constructive comments and suggestions. Ani Rudra Silwal provided excellent research assistance.
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This paper—a joint product of the Global Facility for Disaster Reduction and Recovery (GFDRR) Unit, Sustainable Development Network Vice Presidency, and the Migration and Remittances Team of the Development Prospects Group, Development Economics Vice Presidency—is part of a larger effort of the GFDRR unit to disseminate the findings a World Bank-UN Assessment of the Economics of Disaster Risk Reduction titled “Natural Hazards, UnNatural Disasters”. Thanks to Antonio C. David for his contribution to the macroeconomic analysis in the first part of the paper.
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Appendix
See Tables 5, 6, 7, 8, 9, 10, 11, and 12.
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Mohapatra, S., Joseph, G. & Ratha, D. Remittances and natural disasters: ex-post response and contribution to ex-ante preparedness. Environ Dev Sustain 14, 365–387 (2012). https://doi.org/10.1007/s10668-011-9330-8
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DOI: https://doi.org/10.1007/s10668-011-9330-8