TY  - JOUR
AU  - Morten, Melanie
TI  - Temporary Migration and Endogenous Risk Sharing in Village India
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 22159
PY  - 2016
Y2  - April 2016
DO  - 10.3386/w22159
UR  - http://www.nber.org/papers/w22159
L1  - http://www.nber.org/papers/w22159.pdf
N1  - Author contact info:
Melanie Morten
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305
E-Mail: memorten@stanford.edu
AB  - When people can self-insure via migration, they may have less need for informal risk sharing. At the same time, informal insurance may reduce the need to migrate. To understand the joint determination of migration and risk sharing I study a dynamic model of risk sharing with limited commitment frictions and endogenous temporary migration. First, I characterize the model. I demonstrate theoretically how migration may decrease risk sharing. I decompose the welfare effect of migration into the change in income and the change in the endogenous structure of insurance. I then show how risk sharing alters the returns to migration. Second, I structurally estimate the model using the new (2001-2004) ICRISAT panel from rural India. The estimation yields: (1) improving access to risk sharing reduces migration by 21 percentage points; (2) reducing the cost of migration reduces risk sharing by 8 percentage points; (3) contrasting endogenous to exogenous risk sharing, the consumption-equivalent gain from reducing migration costs is 18.9 percentage points lower. Third, I introduce a rural employment scheme. The policy reduces migration and decreases risk sharing. The welfare gain of the policy is 55-70% lower after household risk sharing and migration responses are considered
ER  -