Affiliation:
1. Faculty of Economics, University of Cambridge, Austin Robinson Building, Cambridge CB3 9DD (e-mail: )
2. Department of Economics, Yale University, Box 208269, New Haven, CT 06520 (e-mail: )
Abstract
We provide an explanation for the large spatial wage disparities and low male migration in India based on the trade-off between consumption smoothing, provided by caste-based rural insurance networks, and the income gains from migration. Our theory generates two key empirically verified predictions: (i) males in relatively wealthy households within a caste who benefit less from the redistributive (surplus-maximizing) network will be more likely to migrate, and (ii) males in households facing greater rural income risk (who benefit more from the insurance network) migrate less. Structural estimates show that small improvements in formal insurance decrease the spatial misallocation of labor by substantially increasing migration. (JEL G22, J31, J61, O15, O18, R23, Z13)
Publisher
American Economic Association
Subject
Economics and Econometrics
Cited by
298 articles.
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