Risk Taking and the Quality of Informal Insurance: Gambling and Remittances in Thailand

39 Pages Posted: 12 Jan 2007

See all articles by Douglas L. Miller

Douglas L. Miller

University of California, Davis - Department of Economics

Anna L. Paulson

Federal Reserve Bank of Chicago

Date Written: January 2007

Abstract

More than 35% of Thai households either give or receive remittances, and remittances account for about one-third of the income of the receiving households. Remittance relationships may be an important source of protection against adverse events for the individuals involved. This paper provides evidence that remittances behave in a way that is consistent with insurance: they are sensitive to shocks to regional rainfall and they respond to household level events. The paper goes on to consider how the quality of insurance that is offered through remittances affects household risk taking behavior. Specifically, we show that the likelihood and the amount of gambling increase with the quality of informal insurance. The findings suggest that households who are more insured shift their portfolios toward riskier investments.

Keywords: Informal Insurance, Risk, Investment, Gambling, Remittances, Thailand

JEL Classification: O12, L83, G11, D8

Suggested Citation

Miller, Douglas L. and Paulson, Anna L., Risk Taking and the Quality of Informal Insurance: Gambling and Remittances in Thailand (January 2007). FRB of Chicago Working Paper No. 2007-01, Available at SSRN: https://ssrn.com/abstract=956401 or http://dx.doi.org/10.2139/ssrn.956401

Douglas L. Miller (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-8490 (Phone)

Anna L. Paulson

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312 322 2169 (Phone)

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