The Effect of Natural Disasters on Remittance Inflows: Jamaica’s Experience

Purpose of Study:

  • To Quantify the effects of natural disasters on remittance inflows to Jamaica

Data source:

 

Results:

    • The results indicate that in the presence of a natural disaster in a given quarter, remittances would increase by an additionally 0.044% in that same quarter.

  • However, when the cost of a natural disaster is measured against total remittance inflows, we found that there was no statistical relationship – no real relationship between the damage inflicted by a natural disaster and the level of remittance inflows.

Discussion:

  • This result can be explained by the fact that natural disasters have an adverse effect on the income of households in Jamaica and as a result, it has propelled migrants abroad to increase the amount of remittances they send to their family and friends.
  • Clark & Wallsten (2003) found that remittances increased by approximately 25 cents for every dollar of damage the hurricane inflicted on the household in Jamaica.
  • Due to Jamaica’s vulnerabilities to natural disasters and given the limited financial resources that are available to the government and private citizens, it is paramount that the country tries to maximize its available resources in order to mitigate the effects of natural disasters.
  • Consequently, this paper proposes that the government should put in place the necessary institutions and structures in order to enhance the levels and use of remittances. These includes: providing more competition in the international money transfer market; providing an avenue for the participation of members in the Diaspora to participate in the affairs in the country; and providing the incentives for persons to used their remittances as insurance against natural disasters.

Application of this study:

  • Over the period 2000 to 2010, natural disasters have cost Jamaica US$ 1,528.205 million in damages. Thus, natural disasters have a significant effect on economic growth and development in Jamaica.
  • Remittances are readily available resources, as it can provide an income for disaster affected households and thus it can act as an insurance against natural disasters. Most importantly, it can enhance the individuals’ ability to build disaster resistant houses and also help businesses to recover quicker in the advent of a natural disaster.

About the author: Tarick Blake has a Msc. Economics degree from UWI Mona and is current an Economist Intern at the Central Bank of Trinidad & Tobago. His interests are investments banking and Economics. He is currently conducting a research on behalf of the Central Bank of Trinidad & Tobago: Title of the Paper: Seasonal adjusting Monetary and Real Sector Series in Trinidad & Tobago

For further information about the above research:

Contact the authortarickromain@yahoo.com


					
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4 Responses to The Effect of Natural Disasters on Remittance Inflows: Jamaica’s Experience

  1. I have a few things that i would like you or any other to explain (Luwayne maybe u can help me understand).

    1. Your data analysis caused you to state:

    “However, when the cost of a natural disaster is measured against total remittance inflows, we found that there was no statistical relationship – no real relationship between the damage inflicted by a natural disaster and the level of remittance inflows.”

    Then you made reference to previous findings by Clark & Wallsten:

    “Clark & Wallsten (2003) found that remittances increased by approximately 25 cents for every dollar of damage the hurricane inflicted on the household in Jamaica.”

    If my understanding is correct these two finding are in contradiction.

    2. “remittances as insurance against natural disasters”, could you expand on this for those of us that a not so economically inclined (in my opinion remittance is not a dependable source of income)?

    good article non the less!!!

    Courtney Powell, BSc. (Eng)

    Like

    • In Clark & Wallsten (2003) study, they found that the cost of natural disaster was statistically related to the inflow of natural disasters. However, in this research, the researcher found that the cost of natural disaster was not statistically related to the inflow of natural disasters.
      However, when natural disaster was measured in terms of occurrence, there was a relationship between the two variables. This was the main purpose of the study.
      In terms of the how remittances act as an insurance. Person can use and have use the remittances they receive to rebuild their homes and properties. Thus, in a sense, remittances can act as a insurance against natural disasters. This was also stated by Clark & Wallsten (2003) in their study.

      Like

      • llemy88 says:

        You sure about this Tarick? “In Clark & Wallsten (2003) study, they found that the cost of natural disaster was statistically related to the inflow of natural disasters. However, in this research, the researcher found that the cost of natural disaster was not statistically related to the inflow of natural disasters”.

        Like

  2. Tarick Blake says:

    I will have to check that out. But I confident of what i said. I will check though

    Like

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