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Risk Sharing and Internal Migration

  • 2014
  • Working Paper
De Weerdt, Joachim; and Hirvonen, Kalle

Publisher/Institution: University of Sussex. International Food Policy Research Institute.

Abstract: Over the past two decades, more than half the population in rural Tanzania has migrated out of their home communities. We hypothesize that this powerful current of internal migrants is changing the nature of traditional institutions such as informal risk sharing. Mass internal migration has created geographically disperse networks, on which we collected detailed panel data. By quantifying how shocks and consumption co-vary across linked households, we show how a previously reciprocal risk-sharing relationship becomes unilateral after migrants move, with migrants insuring their extended family members at home, but not vice versa. This finding cannot easily be explained within existing models of risk sharing or exchange, but is consistent with assistance driven by social norms. Migrants sacrifice 3 percent to 5 percent of their very substantial consumption growth to provide this insurance, which seems too trivial to have any stifling effect on their growth.

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