9.19.2012

"Our results add to an emerging literature that documents very high rates of return to small capital investments in developing countries"

Mushfiq Mobarak presented at the Columbia Sustainable Development seminar on Monday, and while I couldn't be there the paper (pdf here) seemed worth passing on:
Seasonal Migration and Risk Aversion 
Gharad Bryan, Shyamal Chowdhury, A. Mushfiq Mobarak 
Abstract: 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.   
Yes, that's $8.50 and 550-700 calories per person per day for family members.

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