Economics Seminar - "Climate Change, Violence, and Remittance Flows in Mexico"

This paper studies how domestic and international remittances respond to weather shocks in Mexico and whether local violence affects the use of remittances as a coping strategy. I use a novel combination of state-level, administrative, survey, and remotely sensed panel data to investigate these questions. Estimating a gravity model that accounts for network characteristics and potential spatial dependence, I find that remittances are selective, responding positively to drought but negatively to violence. The negative impact of violence is even larger in areas experiencing drought suggesting that households facing violence are especially vulnerable to weather shocks as they are less able to cope via remittances. I further unpack the costs of both drought and organized crime by studying the role of networks and spillovers from neighboring states. I find that network specifics play a key role in remittance patterns and the degree of drought and violence in neighboring states magnifies the main impact, motivating certain policy approaches.