Remittances as insurance for idiosyncratic and covariate shocks in Malawi: The importance of distance and relationship
This paper uses Malawian panel data to show the importance of geography and family relationships when studying remittances. We do not test any hypothesis as such, but instead demonstrate the significance of the source of remittances in testing hypotheses. When remittances are viewed from an insurance perspective, geography matters. Covariate (community) shocks tend to be insured further from home than idiosyncratic ones. When viewed from a motivational perspective, family relationship and culture matter. Furthermore, gift exchange amongst unrelated households can be as important as remittance flows amongst members of the same family in insuring shocks. Inter-household remittances are closely linked to social networks, with business and religious groups being particularly important (perhaps due to trust). Remittance flows are often reciprocal – receiving households often being the main senders, emphasizing their insurance nature.
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- Sarah Harrower & John Hoddinott, 2005. "Consumption Smoothing in the Zone Lacustre, Mali," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 14(4), pages 489-519, December.
- Robert E.B. Lucas, 2006. "Migration and Economic Development in Africa: A Review of Evidence," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 337-395, December.
- Hendrik P. van Dalen & George Groenewold & Tineke Fokkema, 2005. "Remittances and their Effect on Emigration Intentions in Egypt, Morocco and Turkey," Tinbergen Institute Discussion Papers 05-030/1, Tinbergen Institute.
- Jean-Paul Azam & Flore Gubert, 2006. "Migrants' Remittances and the Household in Africa: A Review of Evidence," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 426-462, December.
- Dilip Ratha, 2006. "Leveraging remittances for development," Proceedings, Federal Reserve Bank of Dallas, pages 173-185.
- Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," World Bank Economic Review, World Bank Group, vol. 4(3), pages 251-269, September.
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