Seasonal Migration and Risk Aversion

Pre-harvest lean seasons are widespread in the agrarian areas of Asia and Sub-Saharan Africa. Every year, these seasonal famines force millions of people to succumb to poverty and hunger. An incentive of $8.50 is assigned to households in Bangladesh to out-migrate during the lean season, and document a set of striking facts. The incentive induces 22 per cent of households to send a seasonal migrant, consumption at the origin increases by 30 per cent (550-700 calories per person per day) for the family members of induced migrants, and follow-up data show that treated households continue to re-migrate at a higher rate after the incentive is removed. The migration rate is 10 percentage points higher in treatment areas a year later, and three years later it is still 8 percentage points higher. These facts can be explained by a model with three key elements: (a) experimenting with the new activity is risky, given uncertain prospects at the destination, (b) overcoming the risk requires individual-specific learning (e.g. resolving the uncertainty about matching to an employer), and (c) some migrants are close to subsistence and the risk of failure is very costly. A model with these features is tested by examining heterogeneity in take-up and re-migration, and by conducting a new experiment with a migration insurance treatment. Several pieces of evidence consistent with the model are documented. [BREAD Working Paper No. 319]. URL:[http://ipl.econ.duke.edu/bread/papers/working/319.pdf].