Risk Aversion Preventing Migration…? (Bryan) Flashcards
Rural areas already face greater risk, through what stream?
Weather risk
When is risk aversion especially prevalent (3)
When uncertainty is individual-specific - cannot look at others’ experiences
When downside risk is large - if big potential loss (for poor downside risk is even greater) (pg 80 poverty trap example)
When insurance markets incomplete, and less informal insurance
Seasonal poverty is a big issue - a characteristic is a pre-harvest lean season (since dont have income until harvest, links back to portion sizes reduced seasonally according to fluctuations in production seasonally!)
Why is seasonal deprivation harmful (2)
Worsens physical and cognitive development
Desperate measures to address can have long run adversities - e.g high interest borrowing poverty traps.
2 ways to smooth consumption (prevent seasonal deprivation)
Inter-temporally save (save from past or borrow from future)
Spatially (migrate to somewhere not prone to cyclical incomes and send remittances)
What prevents inter-temporal smoothing (2)
Credit constraints (cannot borrow to address hunger)
Saving constraints (behavioural, or physical lack storage to keep preserves)
Downside of spatially smoothing consumption
Keeps rural markets isolated e.g migration frictions that prevent access to higher wage (RMB wages can be overestimated by selection bias e.g rural educated differs from those educated in city!)
Bryan - Randomly assigned incentives to migrate. 4 groups:
Control
Cash (worth a roundtrip bus ticket + couple days food)
Credit (loan same amount as cash)
Information
See if lowers risk of migration!
Findings of Bryan:
Cash and credit (loan) increased migration rate (around 55% migrate)
No effects of info compared to control group (around 35% of group migrates)
On average 24% of households had a seasonal migrant
Was seasonal migration actually beneficial?
Yes - they save about half of income, and bring back
Corresponding effect on migrant households
(Calories, per capita expenditure, protein, education)
Consume 600 more calories per person daily
Per capita expenditure increases by 30%
Protein consumption increases by 35%
Child education expenditure increases
Did seasonal migration effects persist?
They continued to re-migrate 3 years later, without need for further incentive!
(Extra: 87% go back and work for same employer)
So we considered 6 policy options on migration:
Other policy ideas for migration: (8)
Financial literacy
Improved remittances products
Improve linkages with home communities
Remove regulations
Job searching ease
Visualise lift
Family migration programs e.g enrol kids to schools
Flexible migration loan programs to subside migrants
