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Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines

  • HwaJung Choi

Do remittances sent by overseas migrants serve as insurance for recipient households? In a study of how remittances from overseas respond to income shocks experienced by Philippine households, changes in income are found to lead to changes in remittances in the opposite direction, consistent with an insurance motivation. Roughly 60 percent of declines in household income are replaced by remittance inflows from overseas. Because household income and remittances are jointly determined, rainfall shocks are used as instrumental variables for income changes. The hypothesis cannot be rejected that consumption in households with migrant members is unchanged in response to income shocks, whereas consumption responds strongly to income shocks in households without migrants. Copyright The Author 2007. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank . All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.

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Article provided by World Bank Group in its journal The World Bank Economic Review.

Volume (Year): 21 (2007)
Issue (Month): 2 (May)
Pages: 219-248

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Handle: RePEc:oup:wbecrv:v:21:y:2007:i:2:p:219-248
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