Seasonal Migration and Risk Aversion

72 Pages Posted: 20 Jan 2012

See all articles by Gharad Bryan

Gharad Bryan

London School of Economics & Political Science (LSE) - Department of Economics

Shyamal Chowdhury

The University of Sydney

Ahmed Mushfiq Mobarak

Yale School of Management; Yale University - Cowles Foundation

Date Written: January 2012

Abstract

Pre-harvest lean seasons are widespread in the agrarian areas of Asia and Sub-Saharan Africa. Every year, these seasonal famines force millions of people to succumb to poverty and hunger. We randomly assign an $8.50 incentive to households in Bangladesh to out-migrate during the lean season, and document a set of striking facts. The incentive induces 22% of households to send a seasonal migrant, consumption at the origin increases by 30% (550-700 calories per person per day) for the family members of induced migrants, and follow-up data show that treated households continue to re-migrate at a higher rate after the incentive is removed. The migration rate is 10 percentage points higher in treatment areas a year later, and three years later it is still 8 percentage points higher. These facts can be explained by a model with three key elements: (a) experimenting with the new activity is risky, given uncertain prospects at the destination, (b) overcoming the risk requires individual-specific learning (e.g. resolving the uncertainty about matching to an employer), and (c) some migrants are close to subsistence and the risk of failure is very costly. We test a model with these features by examining heterogeneity in take-up and re-migration, and by conducting a new experiment with a migration insurance treatment. We document several pieces of evidence consistent with the model.

Keywords: Bangladesh, Migration, Risk Aversion

JEL Classification: J61, O1, O15, R23

Suggested Citation

Bryan, Gharad and Chowdhury, Shyamal and Mobarak, Ahmed Mushfiq, Seasonal Migration and Risk Aversion (January 2012). CEPR Discussion Paper No. DP8739. Available at SSRN: https://ssrn.com/abstract=1988671

Gharad Bryan (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Shyamal Chowdhury

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

Ahmed Mushfiq Mobarak

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5787 (Phone)

HOME PAGE: http://mba.yale.edu/faculty/profiles/mobarak.shtml

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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