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Migration Choice under Risk and Liquidity Constraints

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  • Kleemans, Marieke

Abstract

This paper develops and tests a migration choice model that incorporates two prominent migration strategies used by households facing risk and liquidity constraints. On the one hand, migration can be used as an ex-post risk-coping strategy after sudden negative income shocks. On the other hand, migration can be seen an as investment, but liquidity constraints may prevent households from paying up-front migration costs, in which case positive income shocks may increase migration. These diverging migratory responses to shocks are modeled within a dynamic migration choice framework that I test using a 20-year panel of internal migration decisions by 38,914 individuals in Indonesia. I document evidence that migration increases after contemporaneous negative income shocks as well as after an accumulation of preceding positive shocks. Consistent with the model, I find that migration after negative shocks is more often characterized by temporary moves to rural destinations and is more likely to be used by those with low levels of wealth, while investment migration is more likely to involve urban destinations, occur over longer distances, and be longer in duration. Structural estimation of the model reveals that migration costs are higher for those with lower levels of wealth and education, and suggests that the two migration strategies act as substitutes, meaning that those who migrate to cope with a negative shock are less likely to invest in migration. I use the structural estimates to simulate policy experiments of providing credit and subsidizing migration, and I explore the impact of increased weather shock intensity in order to better understand the possible impact of climate change on migration.

Suggested Citation

  • Kleemans, Marieke, 2015. "Migration Choice under Risk and Liquidity Constraints," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 200702, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea15:200702
    DOI: 10.22004/ag.econ.200702
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    2. Théo Benonnier & Katrin Millock & Vis Taraz, 2019. "Climate change, migration, and irrigation," Working Papers halshs-02107098, HAL.
    3. Jules Gazeaud & Eric Mvukiyehe & Olivier Sterck, 2023. "Cash Transfers and Migration: Theory and Evidence from a Randomized Controlled Trial," The Review of Economics and Statistics, MIT Press, vol. 105(1), pages 143-157, January.
    4. David Lagakos & Ahmed Mushfiq Mobarak & Michael E. Waugh, 2023. "The Welfare Effects of Encouraging Rural–Urban Migration," Econometrica, Econometric Society, vol. 91(3), pages 803-837, May.
    5. Joseph-Simon Görlach, 2023. "Borrowing Constraints and the Dynamics of Return and Repeat Migration," Journal of Labor Economics, University of Chicago Press, vol. 41(1), pages 205-243.
    6. Imbert, Clément & Papp, John, 2020. "Costs and benefits of rural-urban migration: Evidence from India," Journal of Development Economics, Elsevier, vol. 146(C).
    7. Barbora Šedová & Lucia Čizmaziová & Athene Cook, 2021. "A meta-analysis of climate migration literature," CEPA Discussion Papers 29, Center for Economic Policy Analysis.
    8. Cristina Cattaneo & Emanuele Massetti, 2019. "Does Harmful Climate Increase Or Decrease Migration? Evidence From Rural Households In Nigeria," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 10(04), pages 1-36, November.
    9. Ayala Wineman & Lenis Saweda Liverpool‐Tasie, 2018. "Land markets and migration trends in Tanzania: A qualitative‐quantitative analysis," Development Policy Review, Overseas Development Institute, vol. 36(S2), pages 831-856, September.
    10. Bruno Venditto & Ndumba J. Kamwanyah & Christian H. Nekare, 2022. "Climate change, migration and urbanisation in contemporary Namibia," Working Papers 14, SITES.
    11. Andrea Cinque & Lennart Reiners, 2022. "Confined to Stay: Natural Disasters and Indonesia's Migration Ban," CESifo Working Paper Series 9837, CESifo.
    12. Denise Margaret S. Matias, 2020. "Climate humanitarian visa: international migration opportunities as post-disaster humanitarian intervention," Climatic Change, Springer, vol. 160(1), pages 143-156, May.
    13. Mukherjee, Manisha, 2022. "Climate change and migration: Reviewing the role of access to agricultural adaptation measures," MERIT Working Papers 2022-039, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    14. Sedova, Barbora & Kalkuhl, Matthias, 2020. "Who are the climate migrants and where do they go? Evidence from rural India," World Development, Elsevier, vol. 129(C).
    15. Gatti, N. & Baylis, K. & Crost, B., 2018. "Does climate change cause conflict? Damned if you do, damned if you don’t," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275936, International Association of Agricultural Economists.
    16. Sichko, Christopher, 2021. "Migrant Selection and Sorting during the Great American Drought," SocArXiv wm2p3, Center for Open Science.
    17. Natalia Galvis Arias, 2019. "Migración y seguridad alimentaria en Colombia," Documentos de trabajo 17566, Escuela de Gobierno - Universidad de los Andes.
    18. George Deltas & Richard Sicotte, 2017. "Cartel Organization, Price Discrimination, and Selection of Transatlantic Migrants: 1899–1911," Southern Economic Journal, John Wiley & Sons, vol. 83(3), pages 668-704, January.
    19. Sichko, Christopher T., 2023. "Drought and Migration during the Great Depression," 2023 Annual Meeting, July 23-25, Washington D.C. 335558, Agricultural and Applied Economics Association.
    20. Valerie Mueller & Emily Schmidt & Dylan Kirkleeng, 2020. "Structural Change and Women’s Employment Potential in Myanmar," International Regional Science Review, , vol. 43(5), pages 450-476, September.
    21. Mueller, Valerie & Sheriff, Glenn & Dou, Xiaoya & Gray, Clark, 2020. "Temporary migration and climate variation in eastern Africa," World Development, Elsevier, vol. 126(C).
    22. Sofía Fernández Guerrico, 2023. "Trade Shocks, Population Growth, and Migration," ULB Institutional Repository 2013/357236, ULB -- Universite Libre de Bruxelles.

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    Keywords

    Community/Rural/Urban Development; Environmental Economics and Policy; International Development; Labor and Human Capital; Risk and Uncertainty;
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