Do Migrants Insure Those who Stay Behind? Evidence from the Kayes Area (Western Mali)

Abstract

This article uses recent household survey data from the Kayes area (western Mali) to analyse the determinants of remittances from both internal and international migration. The underlying assumption is that remittances are part of an insurance contract between the migrant and his family. Although this idea is not new, few tests have appeared in the recent literature. After a discussion of various measures of crop income shocks, we employ Powell's censored least absolute deviation (CLAD) estimators in addition to more standard parametric estimators to assess the influence of shocks on remittance behaviour. In contrast to Heckman's two-step or the Tobit estimator, Powell's estimator is consistent in the presence of heteroscedasticity and is robust to violations of the normality assumption for the residuals. Regression results bring some support for the view that insurance is an important motivation for remittances. This welfare function should be taken into account by policy-makers in the design of migration policies.