Document Type
Discussion Paper
Publication Date
7-1-2019
CFDP Number
2185
CFDP Pages
79
Journal of Economic Literature (JEL) Code(s)
D12, D91, D52, O12, R23
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.
Recommended Citation
Meghir, Costas; Mobarak, Ahmed Mushfiq; Mommaerts, Corina; and Morten, Melanie, "Migration and Informal Insurance" (2019). Cowles Foundation Discussion Papers. 70.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/70