Regional Migration, Insurance and Economic Shocks: Evidence from Nicaragua

To test whether transfers sent and received by regional migrants serve an insurance role, this paper estimates the causal impact of income shocks at a migrant's origin and destination location on the bilateral transfer of funds. Using rainfall shocks in rural Nicaragua, I find that migrants aged 15-21 years provide unilateral insurance to their origin household. Distinguishing by destination and economic activity I show that the level of insurance increases when migrants and households are exposed to less correlated shocks. In addition, I find evidence of bilateral insurance among rural migrants exposed to rainfall shocks with low levels of correlation with respect to shocks occurring at origin.