Temporary International Migration, Shocks and Informal Insurance: Analysis Using Panel Data

Tanika Chakraborty () and Manish Pandey

No 14051, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We use panel data for rural Kyrgyzstan to examine households' international migration response when faced with shocks. Using a household fixed effects regression model, we find that while a drought shock increases the likelihood of migration, winter and earthquake shocks reduce the likelihood of migration. We use a simple theoretical framework to illustrate the trade-off between two effects of a shock for a household: loss of income and increase in the need of labor services. We show that migration increases when the former effect of a shock dominates, it reduces when the latter effect dominates. We explore these mechanisms by examining how the migration-response to shocks changes in the presence of alternate coping mechanisms and by evaluating the effect of shocks on a household's decision to send and recall a migrant member. We find that when households have easier access to informal finance the migration-response is muted only for shocks for which the adverse income effect dominates. Our findings also suggest that while shocks for which the loss of income effect dominates have a greater effect on the decision to send a migrant, shocks for which the need of labor services effect dominates only affect the decision to recall a migrant. These findings provide evidence in favor of the proposed mechanisms through which shocks affect temporary migration.

Keywords: temporary migration; shocks; insurance; informal finance; Asia; Kyrgyzstan (search for similar items in EconPapers)
JEL-codes: J61 O15 O16 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2021-01
New Economics Papers: this item is included in nep-dev, nep-ias, nep-iue and nep-lab
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Working Paper: Temporary International Migration, Shocks and Informal Insurance: Analysis using panel data (2021)
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