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Ethiopian Development Research Institute (EDRI) and International Food Policy Research Institute (IFPRI), Seventh International Conference on Ethiopian Economy, June 24, 2010
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INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Insurance Motives to Remit: Evidence from a Matched Sample of Ethiopian Internal Migrants
Alan de Brauw (IFPRI)Valerie Mueller (IFPRI)Tassew Woldehanna (Addis Ababa University)
Ethiopian Economic Association MeetingsJune 25, 2010
1
Motivation
2
Objectives
Explain low remittance rates by examining what motivates migrants to remit
Matched migrant sample• We know migrant’s exposure to shocks,
his demographic and economic situation• We know source household’s exposure to
shocks and their demographic and economic conditions over time
• We have information from all stakeholders that stand to benefit from migration
3
Data
Ethiopian Rural Household Survey (ERHS)• Multi-topic survey• Spans 15 villages from 1994-2009• We use 2004-5 and 2009 rounds which includes 3
additional villages (18 villages total)
Migrant Tracking Survey, 2009• Based on 2004-5 Roster• Tracked migrants
Ages 10+ moved to another PA for 3 mos. Left for economic reasons (includes schooling if
individual now works elsewhere) Relative of household head
• 15 % of households had tracked migrant (313 migrants)
4
Migration Prevalence from ERHS villages
5
Migrant’s Characteristics
% %
Male 62.0 Amhara 30.4
Ages 19-40 yrs
83.40 Oromo 20.0
Single 57.2 Tigrayan 12.5
<5 years ed 17.9 Orthodox christian
53.0
5-8 years ed. 30.4 Protestant 26.8
9+ years ed. 35.1 Muslim 15.3
6
Occupations of Migrants
Prior to migration
Post-migration
Farm worker 43.0 14.1
Daily laborer 3.5 23.3
Domestic work/housekeeper
9.6 12.8
Self-employed 5.1 16.6
Teacher 1.6 12.1
Student 32.4 0.6
Other salaried employment
1.3 11.2
Other/unemployed 3.5 9.3
Migrants 312 313
7
Migrant households
Remit Do not remit
T stat
Tropical livestock units, 2009 6.22 4.82 1.78*
Females (16-40 years), 2004-5 1.20 0.95 1.92*
Males (>40 years), 2004-5 0.71 0.64 1.93*
Females (>40 years), 2004-5 0.86 0.72 2.12**
Head’s primary occupation is farming, 2004-5
0.80 0.68 2.11**
8
Source: ERHS 2004-5 and 2009
Remitters and Non-Migrant households
Non-migrants
Remittingmigrants
T stat
Tropical livestock units, 2009
3.28 4.22 -1.86*
Males (<=15 years), 2009 0.96 0.72 2.46**
Females (<=15 years), 2004-5
0.90 1.23 -2.13**
Males (16-40 years), 2004-5 0.90 1.27 -2.66***
Females (16-40 years), 2004-5
0.97 1.20 -1.84*
Males (>40 years), 2004-5 0.50 0.73 -3.55***
Females (>40 years), 2004-5
0.50 0.80 -4.82***
Hh head’s age, 2004-5 50.18 54.19 -3.06***
Literate head, 2009 0.50 0.38 2.04**9
Source: ERHS 2004-5 and 2009
Motives to Remit Literature
Hoddinott (1994) finds competition and promise of bequests increases incentive to remit in Kenya
De la Briere et al. (2002) find women and males without migrant siblings remit to insure family while all are motivated to remit as an investment in future inheritance in DR
Amuedo-Dorantes and Pozo (2006) find migrants remit to self-insure (against own risk and precautionary savings motive) in Mexico
Osili (2007)also find precautionary savings motive to remit in Nigeria. Skilled more altruistic.
10
Conceptual Framework
11
Self-insurance(Precautionary Saving)
Responsive to the immigrant’s rising exposure to risk in the host community
Family-provided InsuranceResponsive to the
immigrant’s rising exposure to risk in the host community
Remittances
Sent to finance family’s consumption in home community
Sent to accumulate assets in home community
AltruismNon-responsive to the
immigrant’s rising exposure to risk in the host community
Source: Amuedo-Dorantes and Pozo 2006.
Empirical Model
12
2009,
2009,2009,
2004,2009,2009,
imdo
hi
ihii
tll
ShockShock
DHXR
Regression Results (Migrant Variables)
OLSRemittancesCoeff.
TobitRemittancesME
LPMRemitsCoeff.
ProbitRemitsME
Male 108.4* 197.2 0.0106 -0.00410
Daily laborer 97.24 666.4** 0.187* 0.271*
Domestic 249.9** 989.3*** 0.302** 0.402**
Trader 56.73 583.6* 0.198* 0.286*
Teacher 361.8** 1285*** 0.436*** 0.553***
Civil servant -40.94 149.3 0.0759 0.121
Food seller 319.5 1103** 0.188 0.337
Health worker
619.0* 1934*** 0.610** 0.656***
Administrative
323.5 1332*** 0.557*** 0.636***
Other 138.0* 809.4** 0.239** 0.337**
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Includes age and education categorical dummy variables.
Regression Results (Hh variables)
OLSRemittancesCoeff.
TobitRemittancesME
LPMRemitsCoeff.
ProbitRemitsME
Source hh
Adult daughters
16.51 43.19 -0.0152 -0.00688
Adult sons -13.76 -45.84 -0.0158 -0.0192
Land per son -7.861 -27.78 -0.00920 -0.0112
Land per daughter
54.31 178.7* 0.0584** 0.0677**
Livestock -4.859 -2.194 0.00288 0.00329
Sole migrant -156.5*** -380.0** -0.108 -0.112
Destination hh
HH size -24.85 -69.78 -0.0399 -0.0446
Relatives 21.45 -39.97 0.00345 -0.010814
Regression Results (Shock variables)
OLSRemittancesCoeff.
TobitRemittancesME
LPMRemitsCoeff.
ProbitRemitsME
Individual Migrant shock
Migrant reports 2001 (EC) food price rise
14.46 213.2 0.152** 0.176***
Source hh shock
Hh reports 2000 (EC) drought
-82.76 -184.4 -0.0469 -0.0455
Migrants 289 289 289 293
R-squared 0.16 0.04 0.28 0.25
15
Empirical Challenges
Omitted variable bias• Unobservables at the individual level
affect remittance behavior Selection bias
• Remitters different than non-remitters• Remitters may be more risk averse
Future work will consist of matching individual migrant data with individual migrants and non-migrants in 2004-5 and 2009 ERHS surveys to address two issues
16
Discussion
Remitters appear to be positively selected which could explain low remittance rates
Incentives to remit follow self-insurance/ precautionary savings motive
Low remittance rates suggest benefits from migration likely to come from migrant freeing up resources
17