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Migration and Informal Insurance

Costas Meghir (), Ahmed Mushfiq Mobarak (), Corina Mommaerts and Melanie Morton
Additional contact information
Costas Meghir: Cowles Foundation, Yale University, NBER, IZA, CEPR, and Institute for Fiscal Studies, http://economics.yale.edu/people/costas-meghir
Ahmed Mushfiq Mobarak: Cowles Foundation, Yale University, https://economics.yale.edu/people/mushfiq-mobarak
Corina Mommaerts: University of Wisconsin – Madison
Melanie Morton: Stanford University and NBER

No 2185, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Do new migration opportunities for rural households change the nature and extent of informal risk sharing? We experimentally document that randomly offering poor rural households subsidies to migrate leads to a 40% improvement in risk sharing in their villages. We explain this finding using a model of endogenous migration and risk sharing. When migration is risky, the network can facilitate migration by insuring that risk, which in turn crowds-in risk sharing when new migration opportunities arise. We estimate the model and find that welfare gains from migration subsidies are 42% larger, compared with the welfare gains without spillovers, once we account for the changes in risk sharing. Our analysis illustrates that (a) ignoring the spillover effects on the network gives an incomplete picture of the welfare effects of migration, and (b) informal risk sharing may be an essential determinant of the takeup of new income-generating technologies.

Keywords: Informal Insurance; Migration; Bangladesh; RCT (search for similar items in EconPapers)
JEL-codes: D12 D91 D52 O12 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-ias, nep-mig, nep-net and nep-ore
Date: 2019-07
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