Are remittances insurance? Evidence from rainfall shocks in the Philippines

Type Journal Article - The World Bank Economic Review
Title Are remittances insurance? Evidence from rainfall shocks in the Philippines
Author(s)
Volume 21
Issue 2
Publication (Day/Month/Year) 2007
Page numbers 219-248
URL http://wber.oxfordjournals.org/content/21/2/219.short
Abstract
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.

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