Essays on remittances in conflict-affected and fragile states

Mohamed, Abdisalam Abdirahman (2025) Essays on remittances in conflict-affected and fragile states. PhD thesis, University of Glasgow.

Abstract

This thesis investigates the role of remittances in household welfare and the impact of various shocks on remittance flows in fragile conflict-affected Somalia. The thesis constitutes of three interconnected essays.

The first essay analyses how remittances influence key household outcomes, such as asset accumulation, savings behavior, financial inclusion, education and consumption pattern. It utilizes unique survey data from Somalia and propensity score matching techniques are applied to compare households receiving remittances with those that do not, in order to analyze the causal effects of remittances. The results show that remittances (1) have a consistently positive impact on productive assets, such as savings and livestock ownership, as well as on educational attainment for children; (2) enhances financial inclusion and living standards, resulting in higher consumption levels and improvements in both food and non food consumption; (3) benefits both poor and non-poor households, with the most significant impact observed among non-poor recipients; and (4) increase household wealth across both small and large households, although the effect on livestock ownership is less pronounced in large families. The results underscore the important role of remittances in improving key household outcomes in Somalia. This suggests that stabilizing and supporting remittance flows can significantly enhance asset accumulation, savings, and financial inclusion, and consequently increasing living standards. Effective management of remittance mechanisms is essential for maximizing their beneficial impact on household welfare.

The second essay explores the effects of violent conflict events on the flow and frequency of remittances at the sub-national level. It utilizes detailed administrative data on remittance transactions from money transfer operators in eight developed countries (Australia, Canada, Denmark, Finland, Norway, Sweden, the UK, and the US), focusing specifically on remittances sent to Somalia at the district level. The study focuses on 65 out of 74 pre-war districts, analyzing data from January 2017 to December 2021, with a particular emphasis on 58 districts that consistently received remittances. By employing a fixed effects estimator to account for time and district-specific variations, the research finds that violent conflicts significantly disrupt remittance flows. Specifically, a one-month lag in overall violence correlates with reductions in both the amount and frequency of remittances. The analysis reveals varying impacts depending on the type of violence, with explosions and attacks on civilians leading to more substantial declines. Additionally, instrumental variable regression, using the African Union Transition Mission in Somalia (ATMIS) as an instrument, confirms that lagged violence conflicts reduce remittance flows and frequency. These findings highlight the urgent need for improved security and stability in conflict-affected areas to support and potentially increase remittance flows, which are important for household welfare in Somalia. Based on these results, it is recommended that policymakers develop strategies to lessen the effects of local conflicts on remittance flows to ensure the continuous availability of these critical external financial flows.

The third essay investigates the impacts of external economic shocks, such as currency depreciation, regulatory de-risking measures, and increases in the Consumer Price Index (CPI) on remittance flows and frequency. Using administrative data from migrant transactions in Australia, Canada, Norway, Sweden, and the US for the period from January 2017 to May 2023, the study employs a staggered adoption design in combination with the Difference-In Difference (DID) method to analyze the effects of these external shocks on remittance patterns. The results indicate that economic disruptions lead to significant reductions in both the amount and frequency of remittances, and the impacts of such shocks vary (e.g., currency depreciation in Australia, regulatory de-risking measures in Norway and Canada, and increases in the CPI in Sweden each affect remittance flows differently). Extending the analysis with the DID method, the study quantifies the impact of exchange rate depreciation on remittance flows, revealing that a 5-10% depreciation (which proportionally increases the cost of sending remittances) leads to a 4% decrease in remittance amounts. Analyzing shocks by country shows that a 7% rise in remittance costs results in a substantial 12% decrease in remittance flows in Norway, while a 6% increase in costs corresponds to a 7% decline in Sweden. These findings underscore the importance of including such external economic shocks in policy considerations. Effectively addressing and reducing these external shocks is important for sustaining and potentially improving remittance flows, which are important for the economic stability of developing countries.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Subjects: H Social Sciences > HB Economic Theory; H Social Sciences > HC Economic History and Conditions
• Colleges/Schools: College of Social Sciences > Adam Smith Business School > Economics
• Supervisor's Name: Subramanian, Dr. Arjunan, Zhang, Professor Anwen and Ciancio, Dr. Alberto
• Date of Award: 2025
• Depositing User: Theses Team
• Unique ID: glathesis:2025-85475
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 25 Sep 2025 16:02
• Last Modified: 25 Sep 2025 16:05
• Thesis DOI: 10.5525/gla.thesis.85475
• URI: https://theses.gla.ac.uk/id/eprint/85475