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Remittances as insurance for idiosyncratic and covariate shocks in Malawi: The importance of distance and relationship

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  • Davies, Simon

Abstract

This paper uses Malawian panel data to show the importance of geography and family relationships when studying remittances. We do not test any hypothesis as such, but instead demonstrate the significance of the source of remittances in testing hypotheses. When remittances are viewed from an insurance perspective, geography matters. Covariate (community) shocks tend to be insured further from home than idiosyncratic ones. When viewed from a motivational perspective, family relationship and culture matter. Furthermore, gift exchange amongst unrelated households can be as important as remittance flows amongst members of the same family in insuring shocks. Inter-household remittances are closely linked to social networks, with business and religious groups being particularly important (perhaps due to trust). Remittance flows are often reciprocal – receiving households often being the main senders, emphasizing their insurance nature.

Suggested Citation

  • Davies, Simon, 2007. "Remittances as insurance for idiosyncratic and covariate shocks in Malawi: The importance of distance and relationship," MPRA Paper 4463, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:4463
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    References listed on IDEAS

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    1. Sarah Harrower & John Hoddinott, 2005. "Consumption Smoothing in the Zone Lacustre, Mali," Journal of African Economies, Centre for the Study of African Economies, vol. 14(4), pages 489-519, December.
    2. Jean-Paul Azam & Flore Gubert, 2006. "Migrants' Remittances and the Household in Africa: A Review of Evidence," Journal of African Economies, Centre for the Study of African Economies, vol. 15(2), pages 426-462, December.
    3. Dilip Ratha, 2006. "Leveraging remittances for development," Proceedings, Federal Reserve Bank of Dallas, pages 173-185.
    4. Robert E.B. Lucas, 2006. "Migration and Economic Development in Africa: A Review of Evidence," Journal of African Economies, Centre for the Study of African Economies, vol. 15(2), pages 337-395, December.
    5. Hendrik P. van Dalen & George Groenewold & Tineke Fokkema, 2005. "Remittances and their Effect on Emigration Intentions in Egypt, Morocco and Turkey," Tinbergen Institute Discussion Papers 05-030/1, Tinbergen Institute.
    6. Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," The World Bank Economic Review, World Bank, vol. 4(3), pages 251-269, September.
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    Cited by:

    1. Richter, Susan M., 2008. "The Insurance Role of Remittances on Household Credit Demand," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6261, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Ibrahim Sirkeci & Jeffrey H. Cohen & Dilip Ratha, 2012. "Migration and Remittances during the Global Financial Crisis and Beyond," World Bank Publications - Books, The World Bank Group, number 13092, December.
    3. Iliana Kohler & Hans-Peter Kohler & Philip Anglewicz & Jere Behrman, 2012. "Intergenerational Transfers in the Era of HIV/AIDS: Evidence from Rural Malawi," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 27(27), pages 775-834.
    4. Joanne Linnerooth-Bayer & Stefan Hochrainer-Stigler, 2015. "Financial instruments for disaster risk management and climate change adaptation," Climatic Change, Springer, vol. 133(1), pages 85-100, November.

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    More about this item

    Keywords

    Remittances; Insurance; Household Economics; Malawi; Africa;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • D19 - Microeconomics - - Household Behavior - - - Other
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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