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Risk taking and the quality of informal insurance: gambling and remittances in Thailand

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  • Douglas L. Miller
  • Anna L. Paulson

Abstract

More than 35% of Thai households either give or receive remittances, and remittances account for about one-third of the income of the receiving households. Remittance relationships may be an important source of protection against adverse events for the individuals involved. This paper provides evidence that remittances behave in a way that is consistent with insurance: they are sensitive to shocks to regional rainfall and they respond to household level events. The paper goes on to consider how the quality of insurance that is offered through remittances affects household risk taking behavior. Specifically, we show that the likelihood and the amount of gambling increase with the quality of informal insurance. The findings suggest that households who are more insured shift their portfolios toward riskier investments.

Suggested Citation

  • Douglas L. Miller & Anna L. Paulson, 2007. "Risk taking and the quality of informal insurance: gambling and remittances in Thailand," Working Paper Series WP-07-01, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-07-01
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    References listed on IDEAS

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    Cited by:

    1. Diether W. Beuermann & Inder J. Ruprah & Ricardo E. Sierra, 2016. "Do remittances help smooth consumption during health shocks?: Evidence from Jamaica," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(3), pages 1-19, July-Sept.
    2. Diether W. Beuermann & Inder J. Ruprah & Ricardo E. Sierra, 2016. "Do remittances help smooth consumption during health shocks?: Evidence from Jamaica," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(3), pages 1-19.
    3. Stephen P. Ferris & David Javakhadze & Tijana Rajkovic, 2019. "An international analysis of CEO social capital and corporate risk‐taking," European Financial Management, European Financial Management Association, vol. 25(1), pages 3-37, January.
    4. Ferris, Stephen P. & Javakhadze, David & Rajkovic, Tijana, 2017. "CEO social capital, risk-taking and corporate policies," Journal of Corporate Finance, Elsevier, vol. 47(C), pages 46-71.
    5. Gine, Xavier & Menand, Lev & Townsend, Robert & Vickery, James, 2010. "Microinsurance : a case study of the Indian rainfall index insurance market," Policy Research Working Paper Series 5459, The World Bank.
    6. Calero, Carla & Bedi, Arjun S. & Sparrow, Robert, 2009. "Remittances, Liquidity Constraints and Human Capital Investments in Ecuador," World Development, Elsevier, vol. 37(6), pages 1143-1154, June.
    7. Delphine Boutin, 2011. "Envoi de fonds et allocation du temps des enfants au Niger : L'effet indirect des chocs négatifs," Working Papers hal-00637607, HAL.

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    Keywords

    Gambling industry; Payment systems; Insurance;
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