Journal Article

Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines

Dean Yang and HwaJung Choi

in The World Bank Economic Review

Volume 21, issue 2, pages 219-248
Published in print June 2007 | ISSN: 0258-6770
Published online May 2007 | e-ISSN: 1564-698X | DOI: http://dx.doi.org/10.1093/wber/lhm003
Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines

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Do remittances sent by overseas migrants serve as insurance for recipient households? In a study of how remittances from overseas respond to income shocks experienced by Philippine households, changes in income are found to lead to changes in remittances in the opposite direction, consistent with an insurance motivation. Roughly 60 percent of declines in household income are replaced by remittance inflows from overseas. Because household income and remittances are jointly determined, rainfall shocks are used as instrumental variables for income changes. The hypothesis cannot be rejected that consumption in households with migrant members is unchanged in response to income shocks, whereas consumption responds strongly to income shocks in households without migrants.

Keywords: D81; F22; F32; O12; O15

Journal Article.  10719 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; International Factor Movements and International Business ; International Finance ; Economic Development

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