Under-Investment in a Profitable Technology: The Case of Seasonal Migration in Bangladesh

62 Pages Posted: 2 Jun 2014 Last revised: 14 Jul 2014

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: May 2014

Abstract

Hunger during pre-harvest lean seasons is widespread in the agrarian areas of Asia and Sub-Saharan Africa. We randomly assign an $8.50 incentive to households in rural Bangladesh to temporarily out-migrate during the lean season. The incentive induces 22% of households to send a seasonal migrant, their consumption at the origin increases significantly, and treated households are 8-10 percentage points more likely to re-migrate 1 and 3 years after the incentive is removed. These facts can be explained qualitatively by a model in which migration is risky, mitigating risk requires individual-specific learning, and some migrants are sufficiently close to subsistence that failed migration is very costly. We document evidence consistent with this model using heterogeneity analysis and additional experimental variation, but calibrations with forward-looking households that can save up to migrate suggest that it is difficult for the model to quantitatively match the data. We conclude with extensions to the model that could provide a better quantitative accounting of the behavior.

Suggested Citation

Bryan, Gharad and Chowdhury, Shyamal and Mobarak, Ahmed Mushfiq, Under-Investment in a Profitable Technology: The Case of Seasonal Migration in Bangladesh (May 2014). NBER Working Paper No. w20172. Available at SSRN: https://ssrn.com/abstract=2444539

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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