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Migration and Informal Insurance

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Abstract

Do new migration opportunities for rural households change the nature and extent of informal risk sharing? We experimentally document that randomly offering poor rural households subsidies to migrate leads to a 40% improvement in risk sharing in their villages. We explain this finding using a model of endogenous migration and risk sharing. When migration is risky, the network can facilitate migration by insuring that risk, which in turn crowds-in risk sharing when new migration opportunities arise. We estimate the model and find that welfare gains from migration subsidies are 42% larger, compared with the welfare gains without spillovers, once we account for the changes in risk sharing. Our analysis illustrates that (a) ignoring the spillover effects on the network gives an incomplete picture of the welfare effects of migration, and (b) informal risk sharing may be an essential determinant of the takeup of new income-generating technologies.

Suggested Citation

  • Costas Meghir & Ahmed Mushfiq Mobarak & Ahmed Corina Mommaerts & Ahmed Melanie Morten, 2019. "Migration and Informal Insurance," Cowles Foundation Discussion Papers 2185, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:2185
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    References listed on IDEAS

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    1. Emily A. Beam & David McKenzie & Dean Yang, 2016. "Unilateral Facilitation Does Not Raise International Labor Migration from the Philippines," Economic Development and Cultural Change, University of Chicago Press, vol. 64(2), pages 323-368.
    2. Orazio P. Attanasio & Costas Meghir & Ana Santiago, 2012. "Education Choices in Mexico: Using a Structural Model and a Randomized Experiment to Evaluate PROGRESA," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 37-66.
    3. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
    4. Cynthia Kinnan, 2009. "Distinguishing barriers to insurance in Thai villages," 2009 Meeting Papers 1276, Society for Economic Dynamics.
    5. Attanasio, Orazio P & Weber, Guglielmo, 1995. "Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1121-1157, December.
    6. Agha Ali Akram & Shyamal Chowdhury & Ahmed Mushfiq Mobarak, 2017. "Effects of Emigration on Rural Labor Markets," NBER Working Papers 23929, National Bureau of Economic Research, Inc.
    7. Kenneth I. Wolpin & Petra E. Todd, 2006. "Assessing the Impact of a School Subsidy Program in Mexico: Using a Social Experiment to Validate a Dynamic Behavioral Model of Child Schooling and Fertility," American Economic Review, American Economic Association, vol. 96(5), pages 1384-1417, December.
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    More about this item

    Keywords

    Informal Insurance; Migration; Bangladesh; RCT;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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