Do Remittances Act Like Insurance? Evidence from a Natural Disaster in Jamaica

27 Pages Posted: 7 Mar 2003

See all articles by George R. G. Clarke

George R. G. Clarke

Texas A&M International University - A.R. Sanchez Jr., School of Business

Scott Wallsten

Technology Policy Institute

Date Written: January 2003

Abstract

Previous research suggests a correlation between income shocks and remittances (money migrants send to households in their home country). Data constraints, however, have prevented this research from dealing with endogeneity issues or estimating the degree to which remittances may insure against shocks. In this paper we construct a household-level panel dataset for Jamaica that includes not only remittance information, but also detailed information about damage incurred due to a major hurricane (Gilbert). The exogenous nature of the shock, the panel data, and the monetary estimates of damage allow us to address these gaps in the literature. We find, even controlling for household fixed effects and potential moral hazard problems by endogenizing hurricane damage, that remittances do act as insurance, but only partially: our parameter estimates suggest that remittances increased by only about 25 cents for every dollar of damage the hurricane inflicted on the household.

Keywords: Remittances, Insurance, Jamaica, Altruism, Migration, JSLC

JEL Classification: D10, D64, F22, G22, O15

Suggested Citation

Clarke, George and Wallsten, Scott, Do Remittances Act Like Insurance? Evidence from a Natural Disaster in Jamaica (January 2003). Available at SSRN: https://ssrn.com/abstract=373480 or http://dx.doi.org/10.2139/ssrn.373480

George Clarke (Contact Author)

Texas A&M International University - A.R. Sanchez Jr., School of Business ( email )

5201 University Blvd.
Laredo, TX 78041-1900
United States

Scott Wallsten

Technology Policy Institute ( email )

409 12th St., SW
Ste 700
Washington, DC 20024
United States
2027309441 (Phone)

HOME PAGE: http://www.wallsten.net

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