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Seasonal Migration and Risk Aversion

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Pre-harvest lean seasons are widespread in the agrarian areas of Asia and Sub-Saharan Africa. Every year, these seasonal famines force millions of people to succumb to poverty and hunger. We randomly assign an $8.50 incentive to households in Bangladesh to out-migrate during the lean season, and document a set of striking facts. The incentive induces 22% of households to send a seasonal migrant, consumption at the origin increases by 30% (550-700 calories per person per day) for the family members of induced migrants, and follow-up data show that treated households continue to re-migrate at a higher rate after the incentive is removed. The migration rate is 10 percentage points higher in treatment areas a year later, and three years later it is still 8 percentage points higher. These facts can be explained by a model with three key elements: (a) experimenting with the new activity is risky, given uncertain prospects at the destination, (b) overcoming the risk requires individual-specific learning (e.g. resolving the uncertainty about matching to an employer), and (c) some migrants are close to subsistence and the risk of failure is very costly. We test a model with these features by examining heterogeneity in take-up and re-migration, and by conducting a new experiment with a migration insurance treatment. We document several pieces of evidence consistent with the model.

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This paper is a revised paper submitted by the author that combines, replaces, and updates the following two papers originally prepared under contract with Office of Trade and Labor Affairs Contract Research Program: "Longer Run Effects of a Seasonal Migration Program in Bangladesh" by Mushfiq Mobarak, Yale University, 2011, and "Why do Households Fail to Engage in Profitable Migration?" by Mushfiq Mobarak, Yale University, 2011.

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2011-12-16

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migration; risk aversion

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unassigned

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