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Risk sharing and internal migration

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  • De Weerdt, Joachim
  • Hirvonen, Kalle

Abstract

Over the past two decades, more than half the population in our sample of rural Tanzanians has migrated out of their home-communities. We hypothesize that this powerful current of internal migrants is changing the nature of traditional institutions such as informal risk sharing. Mass internal migration has created geographically disperse networks, on which we collected detailed panel data. By quantifying how shocks and consumption co-vary across linked households we show that, while both migrants and stayers insure negative shocks to stayers, there is no one in the network who insures the migrants’ negative shocks. While migrants do share some of their positive shocks, they ultimately end up nearly twice as rich as those at home by 2010, despite practically identical baseline positions in the early nineties prior to migration. Taken together, these findings point to migration as a risky, but profitable endeavour, for which the migrant will bear the risk and also reap most of the benefit. We interpret these results within the existing literature on risk-sharing and on the disincentive effects of redistributive norms.

Suggested Citation

  • De Weerdt, Joachim & Hirvonen, Kalle, 2015. "Risk sharing and internal migration," IOB Working Papers 2015.04, Universiteit Antwerpen, Institute of Development Policy (IOB).
  • Handle: RePEc:iob:wpaper:201504
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    References listed on IDEAS

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    Cited by:

    1. Ambler, Kate, 2015. "Don't tell on me: Experimental evidence of asymmetric information in transnational households," Journal of Development Economics, Elsevier, pages 52-69.
    2. Joachim De Weerdt & Kalle Hirvonen, 2016. "Risk Sharing and Internal Migration," Economic Development and Cultural Change, University of Chicago Press, vol. 65(1), pages 63-86.
    3. Geng, Xin & Ide, Vera & Janssens, Wendy & Kramer, Berber & van der List, Marijn, 2017. "Health insurance, a friend in need? Evidence from financial and health diaries in Kenya," IFPRI discussion papers 1664, International Food Policy Research Institute (IFPRI).
    4. De Weerdt, Joachim & Genicot, Garance & Mesnard, Alice, 2014. "Asymmetry of Information within Family Networks," IZA Discussion Papers 8395, Institute for the Study of Labor (IZA).
    5. Kleemans, Marieke, 2015. "Migration Choice under Risk and Liquidity Constraints," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 200702, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    6. Molina Millán, Teresa, 2015. "Regional Migration, Insurance and Economic Shocks: Evidence from Nicaragua," IZA Discussion Papers 9494, Institute for the Study of Labor (IZA).
    7. Parag Mahajan & Dean Yang, 2017. "Taken by Storm: Hurricanes, Migrant Networks, and U.S. Immigration," Working Papers 17-50, Center for Economic Studies, U.S. Census Bureau.
    8. Luc Christiaensen & Joachim Weerdt & Yasuyuki Todo, 2013. "Urbanization and poverty reduction: the role of rural diversification and secondary towns," Agricultural Economics, International Association of Agricultural Economists, vol. 44(4-5), pages 435-447, July.
    9. Parag Mahajan & Dean Yang, 2017. "Taken by Storm: Hurricanes, Migrant Networks, and U.S. Immigration," NBER Working Papers 23756, National Bureau of Economic Research, Inc.
    10. Lucia Corno & Alessandra Voena, 2016. "Selling daughters: age of marriage, income shocks and the bride price tradition," IFS Working Papers W16/08, Institute for Fiscal Studies.
    11. Hirvonen, Kalle & Lilleør, Helene Bie, 2015. "Going Back Home: Internal Return Migration in Rural Tanzania," World Development, Elsevier, vol. 70(C), pages 186-202.

    More about this item

    Keywords

    internal migration; risk; insurance; institutions; Africa; tracking data;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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