Migration and Informal Insurance: Evidence from a Randomized Controlled Trial and a Structural Model
95 Pages Posted: 23 Jul 2019 Last revised: 8 Apr 2022
Date Written: July 2019
We document that an experimental intervention offering transport subsidies for poor rural households to migrate seasonally in Bangladesh improved risk sharing. A theoretical model of endogenous migration and risk sharing shows that the effect of subsidizing migration depends on the underlying economic environment. If migration is risky, a temporary subsidy can induce an improvement in risk sharing and enable profitable migration. We estimate the model and find that the migration experiment increased welfare by 12.9%. Counterfactual analysis suggests that a permanent, rather than temporary, decline in migration costs in the same environment would result in a reduction in risk sharing.
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