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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

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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.

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File URL: http://mpra.ub.uni-muenchen.de/4463/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4463.

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Date of creation: Jul 2007
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Handle: RePEc:pra:mprapa:4463

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Related research
Keywords: Remittances; Insurance; Household Economics; Malawi; Africa;

Find related papers by JEL classification:
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
D19 - Microeconomics - - Household Behavior - - - Other
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Robert E.B. Lucas, 2006. "Migration and Economic Development in Africa: A Review of Evidence," Journal of African Economies, Oxford University Press, vol. 15(2), pages 337-395, December.
  2. Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," World Bank Economic Review, Oxford University Press, vol. 4(3), pages 251-69, September.
  3. 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. [Downloadable!]
  4. Lei Pan, 2007. "Risk Pooling through Transfers in Rural Ethiopia," Tinbergen Institute Discussion Papers 07-014/2, Tinbergen Institute, revised 28 Sep 2007. [Downloadable!]
  5. Sarah Harrower & John Hoddinott, 2005. "Consumption Smoothing in the Zone Lacustre, Mali," Journal of African Economies, Oxford University Press, vol. 14(4), pages 489-519, December.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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). [Downloadable!]
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