Networks and Mis-allocation: Insurance, Migration, and the Rural-Urban Wage Gap
By Kaivan Munshi, Mark R. Rosenzweig. 2015
163 citations recorded by the source corpus.
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)
Subfields: Economics and Econometrics, Soil Science
View Paper: https://www.semanticscholar.org/paper/c3ad2d4d47d95b1d6f557d403e14d39afe328568
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Citations in the corpus
- Drought of Opportunities: Contemporaneous and Long-Term Impacts of Rainfall Shocks on Human Capital (2017, unknown): “Munshi and Rosenzweig (2016), using the Rural Economic Development Survey, also conclude that rural emigration rates are low.”
- The Impact of Trade on Inequality in Developing Countries (2017, unknown): “groups, and there is compelling evidence that this caste-based informal insurance contributes to why families rarely move in India (Munshi and Rosenzweig 2016).”
- Unity in Diversity? How Intergroup Contact Can Foster Nation Building (2019, unknown): “The results are consistent with the general view that social capital tends to be stronger in more isolated communities with relatively stable membership (Munshi, 2014; Munshi and Rosenzweig, 2016).”
- Temporary Migration and Endogenous Risk Sharing in Village India (2019, background): “This is a reasonable assumption in the case of rural India: as I discuss in Section III, I find little evidence of permanent migration in the data, consistent with other work that has documented very low rates of permanent migration in India (Topalova 2010; Munshi and Rosenzweig 2016).”