Migration and Consumption Insurance in Bangladesh

Résumé

Paper is joint with Costas Meghir, Mushfiq Mubarak, and Corina Mommaerts We investigate the relationship between seasonal migration and informal risk sharing in rural Bangladesh. We use data from a randomized controlled trial which provided incentives for households to migrate (Bryan et al., 2014). Using this experimental variation, we first provide evidence that these incentives substantially increased insurance against income shocks. We then investigate the mechanisms behind this effect by characterizing a dynamic model of migration and endogenous risk sharing. We estimate the model using data from control villages, and use treatment data to validate the model. We find that extending migration opportunities reduced the persistence of income shocks, which in turn relaxed constraints to risk-sharing and allowed for more insurance between households.