Migration and Informal Insurance

79 Pages Posted: 23 Jul 2019

See all articles by Costas Meghir

Costas Meghir

Yale University; Yale University - Cowles Foundation; Institute for Fiscal Studies (IFS); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Ahmed Mushfiq Mobarak

Yale School of Management; Yale University - Cowles Foundation

Corina Mommaerts

University of Wisconsin - Madison - Department of Economics

Melanie Morten

Stanford University

Multiple version iconThere are 3 versions of this paper

Date Written: July 2019

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.

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Suggested Citation

Meghir, Costas and Mobarak, Ahmed Mushfiq and Mommaerts, Corina and Morten, Melanie, Migration and Informal Insurance (July 2019). NBER Working Paper No. w26082. Available at SSRN: https://ssrn.com/abstract=3423795

Costas Meghir (Contact Author)

Yale University ( email )

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Ahmed Mushfiq Mobarak

Yale School of Management ( email )

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

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
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Corina Mommaerts

University of Wisconsin - Madison - Department of Economics ( email )

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Madison, WI 53706-1393
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Melanie Morten

Stanford University ( email )

Stanford, CA 94305
United States

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