“Regional Migration, Insurance and Economic Shocks: Evidence from Nicaragua”

Next Friday, March 13th, at 11.30am, the NOVAFRICA Center welcomes Teresa Molina Millán, from the Paris School of Economics to present her work about internal migration, and co-insurance motives.

Teresa Molina Millán

In developing countries, the large majority of migrants move inside their own countries or to neighboring regions, yet there is limited evidence on whether internal migrants represent a source of insurance for their household of origin or vice-versa. To test whether transfers sent and received by migrants serve an insurance role, this paper estimates the causal impact of income shocks at a migrant’s origin and destination on the transfer of funds. Rainfall shocks in rural Nicaragua are found to lead to changes in income but not in food consumption, indicating that households are able to smooth consumption. I find that migrants between the ages of 15 and 21 years old provide unilateral insurance to their origin household. Distinguishing by destination and economic activity I show that the level of insurance increases when migrants and households are exposed to less correlated rainfall shocks. In addition, I find evidence of bilateral insurance among selected groups of migrants, that is migrants with non-agricultural income and rural migrants exposed to rainfall shocks with low levels of correlation with respect to shocks occurring at origin. These results provide evidence of co-insurance arrangements among household members geographically spread inside a country.