Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines

Yang, Dean C, Choi, HwaJung


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This paper investigates whether remittances sent by overseas migrants serve as insurance for recipient households using a nationally representative household survey from the Philippines.  The authors find that remittances from international migration respond to income shocks experienced by Philippine households.  In particular, changes in income are found to lead to changes in remittances in the opposite direction, consistent with insurance motives. About 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 an instrumental variable for income changes. The authors conclude that while consumption in households with migrant members is unchanged in response to income shocks, while consumption responds strongly to income shocks in households without migrants.