Oded Stark

Consumption Smoothing, Migration and Marriage: Evidence from Rural India

A significant proportion of migration in low-income countries, particularly in rural areas, is composed of moves by women for the purpose of marriage. We seek to explain these mobility patterns by examining marital arrangements among Indian households. In particular, we hypothesize that the marriage of daughters to locationally distant, dispersed yet kinship-related households is a manifestation of implicit interhousehold contractual arrangements aimed at mitigating income risks and facilitating consumption smoothing in an environment characterized by information costs and spatially covariant risks. Analysis of longitudinal South Indian village data lends support to the hypothesis. Marriage cum migration contributes significantly to a reduction in the variability of household food consumption. Farm households afflicted with more variable profits tend to engage in longer-distance marriage cum migration. The hypothesized and observed marriage cum migration patterns are in dissonance with standard models of marriage or migration that are concerned primarily with search costs and static income gains.

On Migration and Risk in LDCs

The authors develop the hypothesis that aversion to risk rather than expectations of higher income is the primary motivation for rural-urban migration in developing countries. This hypothesis maintains that an optimizing risk-averse small-farmer family will try to place a family member in the urban sector in order to diversify its income portfolio. An additional hypothesis related to risk is also considered at the individual rather than the family level. (ANNOTATION)

Remittances and Inequality

In this paper the authors propose a framework and develop techniques for analyzing the impact of migrant remittances on the distribution of rural income by size and subsequently its impact on rural welfare. Household data are used to assign numerical coefficients to the impact of net remittances from both internal and international migrants on income inequality in 2 Mexican villages. The impact of migrant remittances on the distribution of rural income by size depends critically on the degree to which migration opportunities become diffused through the village population on the returns to human capital embodied in remittances and on the distribution of potentially remittance-enhancing skills and education across village households. Our empirical findings demonstrate that in a village where many households contain internal migrants but few have experience migrating to the U.S. remittances from Mexico-to-US migrants have an unequalizing impact on village incomes while remittances from internal migrants have a favorable effect on the village income distribution. By contrast in a village with a long historyh of sending migrants to the US and hence a more ready access to US labor markets US-to-Mexico remittances have an equalizing impact on incomes. Remittances from internal migrants in this village however embody a large human capital component and are highly correlated with household income. Hence internal migrant remittances account for a comparatively large share of inequalities in the 2nd village. The overall effect of remittances on income inequality is favorable in both villages. Migration type migration stage and interaction terms all appear to play a role in this context. The effects of small changes in remittances upon income inequality and rural welfare in the 2 villages are explored and some implications for migration and rural development policy are considered. (authors modified)

Migration, Remittances, and the Family

Remittances by migrants along with migration itself are elements in a migrant familys intertemporal contractual arrangement. The reasons why the migrant and his family voluntarily enter into a mutually beneficial contractual arrangement with each other rather than with a 3rd party--are discussed and the conditions under which the contractual arrangement is self-enforcing are identified. Both parties can usually benefit from a number of Pareto-efficient mutual contractual arrangements. This gives rise to an indeterminacy problem solved through a bargaining process between the parties who consequently converge to a contractual arrangement implying a specific flow of migrant-to-family remittances. The chosen contractual arrangement reflects the relative bargaining powers of the parties and variables impinging upon these powers thus bear upon remittances. In the light of these arguments tests are conducted on observed remittance behavior across individual migrants in Botswana. (authors)

Relative deprivation and international migration oded stark

This article provides theoretical reasoning and empirical evidence that international migration decisions are influenced by relative as well as absolute income considerations. Potential gains in absolute income through migration are likely to play an important role in households’ migration decisions, but international migration by household members who hold promise for success as labor migrants can also be an effective strategy to improve a household’s income position relative to others in the household’s reference group. The findings reported in this article provide empirical support for the hypothesis that relative deprivation plays a significant role in Mexico-to-U. S. migration decisions. The findings also suggest that this migration is an effective mechanism for achieving income gains in households that send migrants to the U.S. and that households wisely choose as migrants those of their members who are most likely to provide net income gains.

Migrants' Savings, the Probability of Return Migration and Migrants' Performance

This paper highlights a difference between migrants and the native-born namely a positive probability of return migration. The analysis demonstrates that this probability results in migrants saving more than comparable native-born. This differential may explain why even if all workers are perfectly homogeneous in skills migrants often outperform the native-born in the receiving economy. (EXCERPT)

Labor Migration and Risk Aversion in Less Developed Countries

In this paper we question the pioneering work of Todaro, which states that rural-to-urban labor migration in less developed countries (LDCs) is an individual response to a higher urban expected income. We demonstrate that rural-to-urban labor migration is perfectly rational even if urban expected income is lower than rural income. We achieve this under a set of fairly stringent conditions: an individual decision-making entity, a one-period planning horizon, and global risk aversion. We obtain the result that a small chance of reaping a high reward is sufficient to trigger rural-to-urban labor migration.

Migration, remittances and inequality: A sensitivity analysis using the extended Gini index☆

Abstract This paper uses the extended Gini inequality index to examine the sensitivity of measurements of impacts of migrant remittances on the distribution of household income by size to different value judgements when measuring inequality. The results illustrate the robustness of earlier findings that the impacts of migration on village income distributions differ for different types of migration and for different periods in a villages migration history. The magnitude of these impacts, however, appears to be quite sensitive to the weights attached to incomes at different points in the village income distribution. For example, in a village with considerable Mexico-to-U.S. migration experience, remittances from Mexico-to-U.S. migrants have a favorable effect on the village income distribution. However, the extended Gini analysis shows that this favorable impact decreases as more weight is attached to incomes in the poorest households. This finding is consistent with the view that barriers to high-paying Mexico-to-U.S. migration work exist for households at the bottom of the village income distribution.

International Migration under Asymmetric Information

International migration under asymmetric information usually differs from international migration under symmetric information and often quite dramatically so and in counterintuitive ways. Since in real life information is indeed asymmetric it is somewhat surprising that hitherto the study of international migration has by and large proceeded without explicit recognition of the effect of informational asymmetry. In this paper we show that when at the lowest skill level migration is desirable; i.e. if the (discounted) wage differential is positive for the lowest skill level the introduction of asymmetric information results in a reduction of the quality and quantity of international migration or has no effect at all. When at the lowest skill level migration is not desirable--the (discounted) differential is not positive at the lowest skill level--the introduction of asymmetric information may either result in migration by all or none. When under asymmetric information workers can at some cost to themselves report to foreign employers their individual skill--thus dissociate themselves from the group effect--then provided the cost is small either a U pattern of migration with respect to skill level emerges or migration is uniformly pursued by all though some do and some do not invest in signalling. When the source consists of more than 1 (poor) country it is impossible to predict migration under asymmetric information from a given country without explicitly accounting for changes in the parameters of the other. For example a favorable change (encouraging less migration) taking place in 1 country will through a distinct impact on the overall composition of migration reduce migration from the other country. Finally allowing employers to discover after a while the true productivity of individual migrant workers we obtain the somewhat surprising result that (under a reasonable set of assumptions) eventual discovery may increase the quantity and quality of migration and also increase the wage enjoyed by the low quality migrants. Eventual discovery serves to mitigate the impact of group averaging that deters migration by the high skill workers. Due to migration of some such workers the prediscovery wage of the low skill workers arises in our case sufficiently to outweigh the effect of the future wage decline due to discovery. (authors)

On the Role of Urban‐to‐Rural Remittances in Rural Development

The postulations presented concerning the role of urban to rural remittances in agricultural devleopment stem from a new theoretical approach to rural to urban migration. At the core of this approach lies the utility maximizing family in its specific agricultural context. The easing of the surplus and risk constraints becomes a crucial conditions for carrying out desired technical change. It is rural to urban migration of a family member (i.e. a son or daughter) that by bypassing the credit and insurance markets who are biased against small farmers facilitiates the change. This migration succeeds in accomplishing by means of its dual role in the accumulation of surplus (acting as an intermediate investment) and through diversification of income sources in the control over the level of risk. From the perspective of the question at hand the implication of the new theoretical approach is manifold. First it is clear that urban to rural remittances cannot capture the total effect that rural to urban migration bears on rural development. Secondly urban to rural remittances cannot be assumed to account for the total accumulation of surplus consequent upon migration. In principle a farm produced surplus and an urban produced surplus account in different situations with differing weights for the total accumulation of surplus consequent upon migration. Urban to rural remittances cannot account for the impact of rural to urban migration on agricultural development or for its total surplus accumulation effect yet it is important to attempt to quanitify these remittances. 2 serious problems are inherent in the usage and interpretation of existing evidence. The 1st problem stems from the intertemporal changes in the magnitude of the urban to rural remittances flow and the second arises from the prevalence of a counter flow. There is no reason why remittances (and migration at large) should not be manipulated to become a vehicle of rural propensity even if they were not conducive to agricultural development in the past. This may require some minimal institutional intervention. Sufficient evidence exists to suggest that rural to urban migration and urban to rural remittances can and have been used to transform agricultural modes of production. What a constructive approach should do is try to analyze why in other cases urban ro rural remittances have been less instrumental to agricultural development.