Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines

Posted: 16 Jun 2008

See all articles by Dean Yang

Dean Yang

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; National Bureau of Economic Research (NBER); University of Michigan at Ann Arbor - Department of Economics

HwaJung Choi

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: 2007

Abstract

Do remittances sent by overseas migrants serve as insurance for recipient households? In a study of how remittances from overseas respond to income shocks experienced by Philippine households, changes in income are found to lead to changes in remittances in the opposite direction, consistent with an insurance motivation. Roughly 60 percent of declines in household income are replaced by remittance inflows from overseas. Because household income and remittances are jointly determined, rainfall shocks are used as instrumental variables for income changes. The hypothesis cannot be rejected that consumption in households with migrant members is unchanged in response to income shocks, whereas consumption responds strongly to income shocks in households without migrants.

Keywords: D81, F22, F32, O12, O15

Suggested Citation

Yang, Dean and Choi, HwaJung, Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines (2007). The World Bank Economic Review, Vol. 21, Issue 2, pp. 219-248, 2007. Available at SSRN: https://ssrn.com/abstract=1146037 or http://dx.doi.org/lhm003

Dean Yang (Contact Author)

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

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HOME PAGE: http://www.umich.edu/~deanyang/

National Bureau of Economic Research (NBER)

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University of Michigan at Ann Arbor - Department of Economics

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Ann Arbor, MI 48109-1220
United States

HwaJung Choi

affiliation not provided to SSRN

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