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Do Remittances Finance Clean Energy in Bangladesh? Evidence from a Natural Experiment

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  • Gazi M. Hassan
  • Sakib Mahmud

Abstract

Using a natural experiment of rainfall-driven remittances, we provide experimental measures of remittances’ effect on rural households’ choice of cylinder gas (LPG) as a cooking fuel in Bangladesh. We use the instrumental variable probit (IV-Probit) approach. The treatment of remittances is randomly assigned to households that suffered losses due to a natural shock from the cyclone-Roanu enabling the instrument to identify the average treatment effect for the treatment group (cyclone-affected remittances recipient households). We find that an exogenous increase in remittances by 1,000 Taka causes the probability of using LPG to rise by 1 percent. The impact of remittances is conditional on the household’s health expenditures. Remittances’ impact on the households’ likelihood of using LPG gets stronger with access to clean water and sanitary toilets. The results are robust to potential violations of the exclusion restriction, alternative specifications and instruments, and possibly omitted variable bias. We recommend policies that should utilize overseas migrant remittances as a strategic tool in formulating a financial, legal, and regulatory framework to achieve SDG 7 by 2030. JEL Classifications: F24, Q40, R20.

Suggested Citation

  • Gazi M. Hassan & Sakib Mahmud, 2024. "Do Remittances Finance Clean Energy in Bangladesh? Evidence from a Natural Experiment," The Energy Journal, , vol. 45(6), pages 135-157, November.
    • Handle: RePEc:sae:enejou:v:45:y:2024:i:6:p:135-157
    DOI: 10.1177/01956574241290601
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    References listed on IDEAS

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    1. Kate Ambler & Diego Aycinena & Dean Yang, 2015. "Channeling Remittances to Education: A Field Experiment among Migrants from El Salvador," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 207-232, April.
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    3. J. Edward Taylor & Alejandro Lopez-Feldman, 2010. "Does Migration Make Rural Households More Productive? Evidence from Mexico," Journal of Development Studies, Taylor & Francis Journals, vol. 46(1), pages 68-90.
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    Keywords

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    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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