Migration and Informal Insurance: Evidence from a Randomized Controlled Trial and a Structural Model
Costas Meghir, Ahmed Mushfiq Mobarak, Corina Mommaerts, Melanie Morten
Abstract
Abstract 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.