Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines

Dean Yang and HwaJung Choi
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HwaJung Choi: University of Michigan

No 535, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: Do remittances sent by overseas migrants serve as insurance for recipient households? This paper examines how remittances sent by overseas migrants respond to income shocks experienced by Philippine households. Because household income and remittances are jointly determined, we exploit rainfall shocks as instrumental variables for income changes. In households with overseas migrants, we find that exogenous changes in income lead to changes in remittances of the opposite sign, consistent with an insurance motivation for remittances. In such households, we cannot reject the null hypothesis of full insurance: on average, essentially all of exogenous declines in income are replaced by remittance inflows from overseas. By contrast, changes in household income have no effect on remittance receipts in households without overseas migrants. Remittance receipts may also be partly shared with others: in migrant households, net gifts to other households move in the same direction as remittance receipts in response to income shocks.

Keywords: remittances; migration; insurance; risk; instrumental variables; rainfall; Philippines (search for similar items in EconPapers)
JEL-codes: D81 F22 F32 O12 O15 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

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http://fordschool.umich.edu/rsie/workingpapers/Papers526-550/r535.pdf

Related works:
Journal Article: Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:535

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