Climatic variability, remittances and household consumption volatility In developing countries

This paper addresses the effect of climatic variability on household consumption volatility and explores the role of migrants’ remittances in smoothing the household consumption during time of harsh climatic events over the period 1980–2019. Using panel data for 110 developing countries and the instrumental variables technique, results show that climatic variability increases household’s consumption volatility. More interestingly, they reveal that the positive effect of climatic variability on household’s consumption volatility decreases with remittances. Results are robust to additional checks such as the two-step generalized method of moments (IV-GMM) estimator and the GMM-System. For policymakers, these insights reveal that migrant remittances are an important lifeline that can mitigate climate shocks damages, but success relies on transparent pricing and initiatives to encourage competition in the transfer services market.