Extending a Lifeline or Cutting Losses? Conflict and Household Receipts of Remittances in Pakistan

I examine the causal effects of long-term exposure to conflict, measured at the micro level, on households’ receipt of remittances. Using IV estimation to overcome the endogeneity of conflict exposure and remittance receipts, and controlling for a range of confounding factors, I find that, contrary to the literature from country-level case studies, long-term exposure to conflict reduces households’ likelihood of receiving any remittances at all, as well as the average amounts of remittances received. The negative effects of long-term conflict exposure on remittances are also stronger for groups that are more likely to use such receipts to invest, rather than for consumption, which suggests that remittances are lower in conflict-affected areas due to the higher risk and insecurity of investments. While existing studies treat conflict only as a source of hardship that creates the need for remittances motivated by altruism, I find that conflict may discourage investment-focused remittances by dampening the investment climate and compelling a revaluation of remitters’ continuing and long-term financial interests in their violence-affected origins, alluding to a significant micro-macro gap in the literature on conflict and remittances.