Insurance Motives for Migration: Evidence from Thailand

Anna L. Paulson
Kellogg Graduate School of Management
Northwestern University

March 2000

Abstract

Migrants often maintain important connections with their origin communities. In

particular, many migrants provide support to non-migrants, usually relatives, through
remittances. Remittances are often an important source of protection against adverse
events for the receiving household. The prevalence and the importance of remittances
from migrants both as a source of income and as insurance, suggest that migrants may
consider their role as future remitters in deciding where to locate. This paper examines
whether the location choices of migrants who remit are consistent with a desire to
mitigate the risk faced by the remitting and the receiving households. Cross-sectional
household data on the location and earnings of remitters and remittees is used together
with historical rainfall and gross domestic product data at the provincial level to examine
this question for Thailand. The results indicate that insurance motives play an important
role in explaining migration patterns. Empirical estimates that include insurance
variables perform better than estimates that only consider income maximization. I find
that remitters are significantly less likely to move to Bangkok the more it covaries with
the province they remit to. This is particularly true for remitters who support rural
households who are likely to be poorer and to have less access to national level
institutions (like banks and insurance companies) that could be used to mitigate local risk.

Key words: Insurance, Migration, Remittances

JEL classification: D81, O15, R23

I thank Phillip Braun, John Cochrane, Angus Deaton, Bo Honoré, Matt Kahn, Yair
Mundlak, Chris Paxson, Audrey Singer and especially Robert Townsend for helpful
comments. I am grateful to Chris Paxson for making the rainfall data available and to the
Mellon, Javits and Bradley foundations and the University of Chicago for financial
support.
Address correspondence to: Kellogg Graduate School of Management, Northwestern University, 2001
Sheridan Road, Evanston, IL 60208, 847-467-3322 (voice), 847-491-5719 (fax), apaulson@nwu.edu
(email).
1. Introduction
Migrants often maintain important connections to their origin communities. In
particular, many migrants provide support to non-migrants, usually relatives, through
remittances. Migrants living in developed countries remitted $28 billion to households in
developing countries through official channels in 1988. Total remittances are much
higher since informal transfers (transfers in-kind or through other non-official channels)
and remittances from internal migrants are not included in this figure (Russell 1992).
Households in many developing countries rely on remittances from internal and
international migrants for a large fraction of their income. In El Salvador, for example,
33% of the rural poor surveyed in 1976 received remittances which made up 39% of their
income. Ninety-three percent of a sample of rural Indian households received
remittances, and in Malaysia remittances accounted for nearly half of the income of the
poorest fifth of households (Cox and Jimenez, 1990). Thirty-five percent of the Thai
households studied in this paper either send or receive remittances and remittances
account for nearly one-third of the income of receiving households.

Remittances are often an important source of protection against adverse events for
the receiving household. For example, Lillard and Willis (1997) find that the probability
and the amount of remittances from Malaysian children to their parents are sensitive to
the current and permanent income of the child’s family. Income transfers to rural
households in India vary inversely with agricultural profits (Rosenzweig, 1988). In a
study which uses the same data analyzed in this paper, Miller and Paulson (1999) provide
evidence that Thai remittances also behave in a way that is consistent with insurance.
Thai remittances are higher when the receiving household’s income is lower. They also
respond to conditions in the receiving household’s community: remittances are higher
when the receiving household lives in an area that has below average rainfall. The
prevalence and the importance of remittances from migrants both as a source of income
and as insurance, suggest that migrants may consider their role as future remitters in
deciding where to relocate.1

This paper examines whether the location choices of migrants who remit are
consistent with a desire to mitigate income risk faced by the remitting and the receiving
households. I consider a framework that is appropriate for analyzing migration decisions
when the migrant and the rest of the family will continue to pool income even after the
migrant moves. The model implies that families will diversify across locations, which
are not perfectly correlated, and send remittances in order to reduce the variance of
consumption. Cross-sectional household data on the location and earnings of remitters
1
It is important to note that any number of things could motivate remittances and they could still provide
insurance. Even if remittances have a strategic or contractual component, to insure future inheritances or to
repay parents for educational investments, for example, they can still have an important insurance
component. So long as the timing and the amount of payments are sensitive to shocks faced by the
remitting and the receiving household, they will help the extended family smooth consumption. Many
informal contracts in developing countries appear to provide insurance together with other services. Ligon
(1993) finds evidence of insurance in long-term sharecropping arrangements in India. Udry (1990) reports
that the timing and the amount of repayment on informal loans in Northern Nigeria vary as a function the
circumstances of both the lending and the borrowing household.

2
and remittees is used together with historical rainfall and gross domestic product data at
the provincial level to test the implications of the model for Thailand.

The framework that is considered here is very similar to the one that Rosenzweig
and Stark (1989) describe in their analysis of migration at marriage in rural India. They
test the hypothesis that rural families diversify spatially covariant risk by linking
themselves to other villages via marriage. Using longitudinal data from rural India, they
find that households who experience more exogenous variability in agricultural incomes
are more likely to be linked by marriage to more distant villages. These strategies to deal
with exogenous risk appear to be successful. In particular, for a given level of profit
variability, the variability of household food expenditures is decreasing in both the
number of married women in the household and in the distance between the household
and the origin household of the married women. This paper considers whether the
Rosenzweig and Stark framework might help to explain migration patterns more
generally, given how frequently migrants remain connected to their origin communities
through remittances.

The degree to which the migrant and the rest of the family can smooth
consumption via remittances depends on the covariance of income shocks to the two
locations. Migrants who move to places where income shocks covary negatively with the
place they remit to are likely to be a good position to provide insurance in the form of
remittances when their families experience bad times. So from a migration/insurance
perspective greater covariance is undesirable. However, covariance in income shocks
may also capture other aspects of similarity between two places that might translate into
utility or income gains for the migrant. Work skills may transfer more readily between
two locations that are highly covariant. Language, culture, food and so on may also be
more likely to be similar. The insurance benefits of moving to a location that is
dissimilar in terms of covariance may be offset by the costs associated with the
unfamiliar. Households who lack access to other means of insurance will be unable to
take advantage of the gains associated with moving to a place that is similar. Households
who do have access to other forms of insurance will be able to make migration decisions
purely on efficiency/utility grounds.

Insurance considerations may be particularly important for migrants who come

from rural areas. Forty-three percent of rural Thai households grow rice and the rice
harvest varies significantly with rainfall. Paxson (1992) finds that the income of rice
farmers would increase by 13% if rainfall were one standard deviation above its long-run
mean from April to June.2 Much of the income risk faced by these households is likely to
be shared by their neighbors. Local efforts to cope with this risk are unlikely to succeed.3
In principle, rural households could use national or regional institutions (banks, insurance
companies, etc.) to diversify shared local risk. In practice, these institutions are often
unavailable to rural households. In contrast, urban households may face less covariant
income risk and have greater access to institutions that can be used to smooth the

2
Paxson’s study uses the same household and rainfall data that is analyzed in this paper.
3
Information and enforcement advantages may make the local community particularly effective, however,
in dealing with shocks that are unique to a particular household.

3
common risk that they are confronted with. The desire to be in a good position to insure
their families should play a smaller role in determining the location of migrants who
remit to households in urban areas.

The next section of the paper discusses the framework and develops implications
for the location decisions of migrants who are concerned with diversifying risk. Section
3 describes the cross-sectional and the time series data that are used in this exercise. In
section 4 an econometric analysis of the location decisions of remitters is performed, to
see whether they are consistent with a desire to diversify risk. Section 5 concludes. The
results indicate that insurance motives play an important role in explaining the migration
pattern of remitters. Empirical estimates that include insurance variables perform better
than estimates that consider only the desire to maximize income as a motive for
migration. Remitters are less likely to move to Bangkok the more shocks to Bangkok
covary with the province that they remit to. This is particularly true for rural households
who are likely to be poorer and to have less access to national level institutions that they
could use to mitigate local risk. In contrast, there is some evidence that migrants from
urban areas are more likely to move to Bangkok the more it covaries with the place they
send remittances to. They have less reason to worry about migrating to deal with local
risk, so they are free to enjoy the efficiency gains associated with higher covariance.

2. Framework

This paper is concerned with understanding patterns of migration in a setting

where migrants maintain ties to their origin communities by sending remittances that are
sensitive to the conditions of the sending and the receiving households. In this setting
migrants will take their future role as remitters into account in making decisions about
where to live. In order to make the discussion more concrete and to motivate the specific
form of the estimates that are presented below, consider the expected utility of a family
that is made up of two individuals, the migrant (m) and the non-migrant (n). The migrant
and the non-migrant will pool resources regardless of where they live.4

Suppose that the migrant moves to province p and that the non-migrant remains in
province o (origin). Family resources are equal to the sum of the migrant’s and the non-
migrant’s earnings. Total resources will be a function of the characteristics of the
individuals who make up the family and the provinces they live in. There is uncertainty
associated with both the individual and the provincial components of income. Province
level characteristics are common to all individuals who live in the province and the only
way to mitigate the risk associated with a given province is to be linked to a remitter who
lives in another province.5 To summarize, total family resources, Y, can be written:
4
In principle, the family could be made up of many members and the location of each of them would be
part of a more complicated maximization problem. In practice, however, very few families studied here
receive remittances from more than one person.
5
In practice, families have access to other smoothing devices that they may use to diversify idiosyncratic or
provincial level risk. The impact of borrowing and lending activities, the sale or purchase of assets and
other smoothing activities is included in the income estimates used in the empirical work. These activities
may be particularly effective for diversifying idiosyncratic risk. Provincial risk will be more difficult to
diversify if national level institutions are unavailable.

4
 Y = wm + wn + ε p + ε o + ε m + ε n ,
where wm denotes the expected earnings of the migrant in province p and wn is the
expected earnings of the non-migrant in province o. The variable εp represents the
community level shock to earnings that is common to everyone who lives in province p.
Similarly, εo is the common shock to earnings in province o. Uncertainty in the
individual earnings of the migrant and the non-migrant are captured by εm and εn,
respectively. I assume that community and individual shocks are mean zero, that
individual shocks are independent of other individual shocks and that they are
uncorrelated with community shocks. The variances of the individual shocks are given
by σ2m and σ2n. The variance of the shock to province p is represented by σ2p and σ2o is
the variance of shocks to province o. In contrast to individual shocks, the shock to
province p may be correlated with the shock to province o. The covariance between
shocks to provinces p and o is denoted by σp,o.

Earnings are a function of an individual's characteristics, which are inelastically

supplied to the labor market in the region that they live in. Each individual has a j x 1
vector of characteristics, X. Some characteristics may be common to both the migrant
and the non-migrant; others may be specific to the individual: age, sex, education and
ability.6 Production functions, F, are assumed to be constant returns to scale in individual
characteristics and are allowed to vary by region (North, Northeast, Central, South and
Bangkok).7 Specifically, expected earnings in region r are equal to:
w = F r ( X ).

The family’s utility is equal to the sum of the expected utilities of the migrant and
the non-migrant:
E[v (cm ) + v(cn ) ] [1]
where cm and cn represent the consumption of the migrant and the non-migrant. I assume
that it is optimal for the family to divide total resources equally among the migrant and
the non-migrant, so that the consumption of both the migrant and the non-migrant is
given by:
c = c m = c n = 1 ( wm + wn +ε p + ε o +ε m + ε n − D p )
2
The variable Dp denotes the cost of sending the migrant to province p, as well as the costs
associated with splitting the family up. In general, Dp should be an increasing function of
distance, since the cost of moving and the cost of maintaining ties to family members
who have moved is increasing in distance.

6
I treat characteristics as though they are handed out at birth, but education in particular may be endogenous
to location choices.
7
Restricting individual production functions to be common over a region anticipates the empirical work
presented in Section 4. The region is a much larger geographic unit than the community. In principle,
production functions could vary by community, but there are not enough observations to estimate them at
this level of specificity. Communities are represented by provinces in the empirical work, and there are 73
provinces in Thailand.

5
 The empirical work focuses on estimating a version equation [1] that assumes that
utility functions are quadratic. This assumption means that families only care about the
mean and the variance of consumption. If shocks to earnings were normally distributed,
then utility would depend only on first and second moments.8 While mean-variance
utility provides only a rough approximation of utility functions that depend on higher
moments, it is a much richer approximation than the typical assumption in the migration
literature of risk neutrality. Assume that utility functions for both the migrant and the
non-migrant are given by:
δ
v(c) = α + γc + c 2 , δ < 0
2

Rewriting [1] using quadratic utility, substituting in for expected consumption and taking
expectations delivers an expression for expected utility when the migrant lives in
province p:
δ δ
E[2v(c)] = 2α + γ ( wm +wn − D p ) + ( wm +wn − D p ) 2 + (σ m + σ n + σ p + σ o +2σ p ,o ) [2]
4 4

Notice that the utility of having the migrant in province p is increasing in the
migrant’s earnings in province p and decreasing in the cost of moving to province p.
Standard models of migration that assume risk neutrality would also deliver this
prediction. The rest of the terms in equation [2] come from the assumption of quadratic
utility. Focusing on the terms that have to do with insurance, we notice that utility is
decreasing in the variance of income shocks to province p. Province p is relatively more
attractive when income is less uncertain there. Utility is also decreasing in the covariance
between shock to province p and province o. The lower the covariance between province
o and province p, the better the insurance the migrant can deliver through remittances.

In addition to the implications that we can derive directly from equation [2], the
importance of insurance should also depend on whether or not the households who are
being supported by remitters can diversify local risk in some other way besides through
migration and remittances. Migrants who come from areas without institutions like
banks and insurance companies will weigh the insurance characteristics of potential
destinations particularly heavily in choosing where to move. In contrast, migrants who
come from households who have access to institutional forms of insurance will care less
about the insurance characteristics of potential destinations. These migrants may even
prefer to move to areas that covary a lot with the place they remit to, if that covariance
captures similarities between locales that translate into higher utility for the migrant.
This implication is tested by comparing the impact of the covariance and variance of
potential destinations on location decisions for migrants who remit to rural households

8
The normality of shocks to provincial GDP is overwhelmingly rejected. For many provinces, normality of
rainfall shocks cannot be rejected. However, this does not imply that the shocks to agricultural earnings
which are proxied by rainfall shocks are normal.

6
with their effect on migrants who remit to urban household.9 Banks and insurance
companies are less active in rural areas and rural households may face more common risk
than urban households, so covariance should be more costly for rural households.

Insurance considerations should play no role in the location decision of migrants

who are the sole source of support for the households they remit to. If the receiving
household does not face shocks to the local area because all of their income comes from
remittances, then there is no local risk to insure. Inactive households come close to
mimicking this situation. The survey defines inactive households as those who receive
only property and remittance income. Remitters who support inactive households should
not be affected by insurance concerns in choosing where to live. Only income should
matter to them.

It is not clear what effect the variance of shocks to the receiving household’s
province should have on the remitter’s location choice. On the one hand, households
who live in areas that have more variable local conditions will have a higher demand for
insurance, so remitters who come from more variable places may be more concerned with
insurance in choosing destinations. On the other hand, the variability of income in the
receiving province will reduce the expected utility from any particular location chosen by
the remitter. This is the effect that is captured in equation [2]. In addition, the effect of
may differ for rural and urban households. If urban households have greater access to
institutions to diversify local risk, then variance will be less of a factor in their choice of
location, compared to rural households who may not have access to these institutions.

The migration literature emphasizes network and information reasons in

explaining why people from the same area often migrate to the same place (see Massey
et. al., 1993, for example). The framework outlined above provides an alternative
explanation. If Bangkok is a good insurance match for your household (from the point of
view of diversifying common local risk), then it will also be a good insurance match for
your neighbors.

3. Data

The implications discussed above are evaluated using cross-sectional data from
the 1988 Thai Socio Economic Survey (SES) combined with time series information on
rainfall and gross domestic product for each of Thailand’s 73 provinces over the period
1978 – 1987. The Thai SES records data for approximately 11,000 households in 1988.
The survey includes detailed consumption and income information for each of the
surveyed households, as well as the age, education, occupation and earnings of each
household member. If someone in the household reports sending money or goods to
someone outside the household during the twelve months prior to the survey, the
household is considered a remitter. Receiving households are analogously defined.

9
Urban households also tend to be wealthier than rural households so they may be better able to self-insure
by selling assets to make up for income shortfalls. Unfortunately, the data do not provide enough wealth
information to examine the impact of wealth directly.

7
 If a surveyed household sends a remittance, the value of the transfer, how it was
delivered and whether it was for educational purposes are recorded. In addition, the
survey reports the receiver's province, occupation, industry, community type (rural,
urban, foreign), as well as the relationship of the sender and the receiver. Unfortunately,
the income of the receiving household (other than the amount of the remittance) is not
recorded. There are similar data about the remitter if someone in the household receives
a transfer. If the surveyed household receives a transfer, the total income of the sending
household is not known, although the province, occupation, industry, community type
and relationship of the sender and the receiver are recorded.

Table 1 provides a summary of the data depending on whether or not the survey
household sent a remittance, received a remittance, did both, or did neither in the year
prior to the survey. The income of households who send remittances is nearly twice that
of households who receive remittances. In addition, the transfers recorded in the SES
flow from households who are headed by people who have three years more schooling
and are ten years younger than the heads of recipient households. Table 1 also describes
the regional and occupational distribution of the sample by remittance status. Receivers
are over-represented in the very poor northeastern region of Thailand, while remitters are
more likely to live in Bangkok. Remitting households are more likely to live in urban
areas (55%), compared to receiving households (32%). Remitters are also more likely to
be entrepreneurs and professionals than are households who receive transfers. Receiving
households, on the other hand, are likely to farm or be economically inactive.10

Table 2 documents the importance of remittances in supplementing the income of

receiving households. Remittances account for 33% of the total income (that is,
including remittances) of receiving households, and remittances account for about 16% of
sending households' total income. Most remittances flow from children to their parents.
58% of households who receive remittances report that the sender was their son or
daughter. Fifty-four percent of households who send remittance send them to their
parents. Almost 60% of remittances were delivered in person. This supports using the
distance between the giving and the receiving province as a proxy for the cost of
migrating.

While remitters report doing so to help pay for educational expenses more than
30% of the time, only 9% of receiving households report that the remittance was intended
for this purpose. This is likely to be a feature of who was included in the sample, rather
than evidence of moral hazard. The number of people who actually receive remittances
for educational purposes is likely to be much higher than the percentage reported in the
survey, since the institutional population (students living in dormitories, for example) is
not included in the sample. The fraction of remittances that were for educational

10
Economically inactive households can receive only property and/or remittance income. Because their
income may not depend on local shocks, these households may be less exposed to provincial risk than their
neighbors. I use this variation in how important insurance motives may be to evaluate the robustness of the
findings.

8
purposes is consistent with the fraction received from parents (in the case of households
who received a remittance) and with the fraction of households giving to sons or
daughters (in the case of households who gave a remittance).11

The picture that emerges from these two summary tables is that remittances are
primarily old-age support. They flow from young, relatively well-educated, urban
individuals with high incomes to their older, less-educated, low-income parents who live
in rural areas. Miller and Paulson (1999) document that this support of the elderly
through remittances is coupled with insurance: remittances are larger when the receiving
province or the receiving household experience bad times. The fact that remittances
appear to provide old-age support is important for this paper because it means that we do
not need to be overly concerned with sample selection issues.

The sample selection problem of concern is that the survey only provides
information about the province that a household is linked to when the surveyed
household sent a remittance at some point in the 12 months prior to the survey. If
households only send remittances when they experience a good shock and the family that
they support receives a bad shock, then the sample of remitters will consist
disproportionately of people who live in places that covary very little (or negatively) with
the places they remit to.12 Because most observed remittances appear to provide old-age
support and are therefore likely to flow consistently from remitting households to
receiving households, the potential for sample selection problems is mitigated. Rather
than determining whether a household sends a remittance, shocks to the income of the
sending and the receiving household will determine the size of the transfer. In any case,
to the extent that the sample of remitting households is affected by selection, this effect is
likely to make it harder to find evidence that location decisions are systematically
influenced by the insurance characteristics of potential destinations. The robustness of
the results to sample selection effects is also investigated by analyzing location choices of
a particularly selected sample – households that sent remittances in the month prior to the
survey.

In addition to providing information on remitters and remittees, the SES identifies

households who have changed "amphoes" (a geographic unit similar to a county in the
United States) in the last ten years. I call these households "migrants". The earnings of
migrants who live in Bangkok areas are used to estimate expected earnings in Bangkok
for remitters. The percentage of urban migrants in Bangkok who remit is substantial,
more than 60%, suggesting that they are a good comparison group. Like remitters, the

11
The empirical work treats all remittance the same regardless of whether they were sent for educational
purposes or for some other reason. None of the results are sensitive to whether educational remittances are
included or not. We would expect migrants who move to continue their education to be affected by
insurance, if these migrants often stay and work in the place where they were educated.
12
The covariance of shocks between the provinces of remitting and receiving households do not appear to
be systematically low. The simple average covariance of gdp shocks to each province with gdp shocks to
Bangkok is –5,102 (excluding the covariance of Bangkok with itself). The weighted average covariance,
where the weights are equal to the percentage of remitters in Bangkok who remit to the province in
question, is –1,602, again excluding remitters in Bangkok who remit to Bangkok.

9
heads of urban migrant households tend to be young and highly educated (relative to their
non-migrating counterparts), although urban migrants are somewhat younger than
remitters.

Time series data on rainfall and gross domestic product are used to estimate the
covariance pattern of shocks to provincial income. Annual provincial per capita gross
domestic product data for 1978 to 1987 from the Office of the National Economic and
Social Development Board, Office of the Prime Minister and annual observations of
provincial rainfall over the same period are used to create estimates of the variance-
covariance matrix of provincial income shocks. The rainfall data come from the
Meteorological Department of the Ministry of Communications, which measures rainfall
at 61 meteorological stations.13 Rainfall is an important predictor of income, especially
for agricultural households. In 1988, 66% of the Thai labor force was employed in
agriculture according to the Thai Labor Force Survey, and agriculture made up 17% of
GDP.

One concern is that rainfall shocks may not be a good measure of income
uncertainty in Bangkok and other urban areas. But it turns out that GDP in Bangkok is
correlated with the previous year’s rainfall. It appears that additional rainfall boosts the
harvest and shows up in Bangkok incomes in the following calendar year. One check on
the reliability of the provincial GDP data is to look at how it is related to provincial
rainfall. When provincial GDP is regressed on rainfall, controlling for year and region
effects, the results indicate that mean per capita provincial GDP would increase by 17%
if rainfall were one standard deviation above its mean. This regression has an adjusted R2
of 57%. Using the same rainfall data and observations on household income from the
Thai SES, Paxson (1992) finds roughly the same relationship between rainfall and the
income of rice farmers: their mean income would increase by 13% if rainfall were one
standard deviation above the mean from April to June.

Annual rainfall shocks are constructed by subtracting the long run average for
each province from each annual observation. I use a variety of methods to calculate GDP
shocks for each province. The GDP covariances used in the analysis are based on the
residuals from an ar(1) regression of GDP for each province. With only ten years of GDP
data available for each province, the potential for over fitting the data is very real. The
ar(1) regressions seem like a reasonable compromise which allows for meaningful trends
in GDP as well as for sufficient flexibility. In any case, the results are robust to
alternative methods of constructing GDP shocks. Covariances calculated from the
residuals of province by province regressions of GDP on a constant term and a linear
time trend deliver the same results. As do covariances that are calculated from the
residuals of regressions that also include a quadratic time trend and regressions that add a
third order time trend as well.

13
Provinces without rainfall stations are assumed to have the same rainfall as the nearest province for
which data is available.

10
 Distance data are also collected at the provincial level. The road distance in
kilometers between the capital of the remittee's province and Bangkok is used to proxy
for the cost of moving to Bangkok. The source of this data is a kilometer chart on a map
of Thailand.

4. Empirical Analysis

In order to evaluate whether the location choices of remitters are consistent with
the implications of insurance motivated migration, I consider how the decision to move to
Bangkok is related to the variables that are suggested by equation [2]. The idea is that the
remitter will be more likely to move to Bangkok the higher the expected utility the
extended family enjoys when the remitter is in Bangkok, where utility depends on the
variance and covariance of income as well as on its magnitude. Bangkok is a major
migrant destination. Thirty-five percent of remitting households live in Bangkok,
compared to only 18% of households who neither send nor receive remittances. Most
studies report that migration to Bangkok is motivated primarily by the desire to improve
income (see Adulavidhaya and Onchan, 1985, for example). Bangkok accounts for
approximately 30% of Thai GDP and is the only major city in Thailand, with close to 6
million people (or 10% of the Thai population) living in the city and surrounding suburbs
in 1988. The next largest city, Chiang Mai, had approximately 164,000 residents in
1988. Since Bangkok is the focus of rural to urban migration in Thailand and the desire
to raise incomes clearly plays a role in why people move there, it is particularly
interesting to see whether the decision to move to Bangkok is influenced by insurance
considerations.

The expected utility of the extended family if the remitter lives in Bangkok is not
observable. Instead, the remitter’s decision to live in Bangkok is observed. Let B be
equal to one if moving to Bangkok maximizes the family’s expected utility, otherwise B
will equal 0. Then the probability of observing B equal to one for household i can be
represented by:
P( B = 1) = P( µ i > − β ′Z i )
= 1 − F (− β ′Z i )

where I assume that the error term, µi, is distributed log Weibull, and is due to household
heterogeneity. The function F is the cumulative logistic function, Z is the vector of
independent variables, and β is the vector of parameters to be estimated. Given these
assumptions, the maximum likelihood logit model can be used to estimate the probability
of moving to Bangkok. 14

14
There are a number of alternative statistical models that could be used to evaluate the implications of
insurance motivated migration for the location pattern of remitters. For example, one could use a
multinomial or conditional logit framework to look at choice of a particular province out of the 73 possible
provinces in Thailand that remitters could have migrated to. The findings do not differ substantively if a
conditional logit framework is used to analyze the province choices of remitters.

11
 The independent variables are chosen to mimic the utility of having the remitter in
Bangkok under the assumption of quadratic utility (equation 2). They include variables
that capture the potential income gains and the costs of having the remitter live in
Bangkok: an estimate of expected earnings in Bangkok for the remitter and the distance
in kilometers between the receiving household’s provincial capital and Bangkok. The
quadratic utility assumption also dictates including quadratic terms in these variables and
their interactions with one another. Higher expected income in Bangkok will increase the
likelihood that the remitter moves to the capital, although at a decreasing rate. Similarly,
the greater the distance between Bangkok and the receiving household’s province, the
less likely it will be that the remitter moves to Bangkok. This effect should diminish as
distance increases.

The expected income of the receiving household also plays a role in determining
the utility of having the remitter in Bangkok. The greater the income of the receiving
household, the greater the utility of having the remitter live in Bangkok. This utility is
decreased by the interaction between the remitter’s expected income and the receiving
household’s expected income. The expected utility of having the remitter in Bangkok is
increasing in the interaction of the distance between Bangkok and the receiving
household’s province and the receiving household’s expected income. For a given
family, the expected income of the receiving household will be fixed regardless of where
the remitter lives. However, this variable will vary in the cross-section. The estimated
coefficients for these variables will indicate to what extent people who remit to higher
income households are more likely to move to Bangkok, and the degree to which this
likelihood increases when Bangkok is further from the place they remit to and decreases
when their expected earnings in Bangkok are high.

The estimates of who moves to Bangkok also include insurance variables that
capture the effect of the variance and the covariance of province level income shocks to
the remitting and the receiving households. Depending on the specification, the estimates
include either the estimated variance of rainfall or GDP in the receiving household’s
province and the covariance of either rainfall or GDP shocks to Bangkok and the
receiving household’s province. The more Bangkok covaries with the receiving
household’s province the more difficult it will be to diversify provincial level risk by
living in Bangkok, so greater covariance should be associated with a lower probability of
moving to Bangkok. If the assumption of quadratic utility is correct, we expect that the
more variable income in the receiving household’s province is the lower the utility of
having the remitter living in Bangkok. Equation [2] suggests that the variance of shocks
to Bangkok will also be important and that the more variable income in Bangkok is the
less likely people will be to move there. Clearly this variable will be the same for all
households, so its effect is incorporated into the constant term.

Equation [2] also indicates that variances in idiosyncratic shocks (as opposed to
province level shocks) to the incomes of remitting and the receiving households will
affect the remitter’s decision to move to Bangkok. The estimates do not include
measures of these variables. Because these shocks will not be common to everyone in a

12
particular location, it should be possible to smooth them locally. If this is the case, their
variance will not play a role in determining who moves to Bangkok.

In addition to the variables suggested by equation [2], the estimates also include
controls for the receiving household’s province. These control variables are added to
ensure that the covariance and variance terms really capture the potential for providing
insurance by having the remitter live in Bangkok, rather than some other characteristic of
the receiving province. The addition of the province controls means that the estimated
coefficients measure the effect of the independent variable on the likelihood of moving to
Bangkok, relative to the average likelihood that someone who remits to a particular
province will move to Bangkok.

A number of the independent variables are estimated: the expected income of the
receiving household, the remitter’s expected income in Bangkok, the variance of shocks
to the receiving province and the covariance between Bangkok and the receiving
province. The procedure for estimating provincial variances and covariances from
rainfall and GDP data is described in the previous section. Estimates of the expected
income of the receiving household are based on regressions presented in Table 3. For
each region, the per capita monthly income (net of remittances) of receiving households
is regressed on characteristics of the household head: age, age squared, years of schooling
and years of schooling squared. The estimates also include controls for whether or not
the household farms and whether they live in an urban area. The regression results are
used to create measures of “expected” income for each receiving household. Next these
expected income measures are averaged by province and community type (urban or
rural). This procedure delivers a measure of the expected income of the receiving
household for each province and community type that respects the distribution of
characteristics among households who receive remittances across provinces and
communities. For each household who sends a remittance, the information about the
province and the community type of the receiving household determines the measure of
the expected income of the receiving household that is used in the analysis.

The regression presented in Table 4 is used to estimate remitters’ expected

earnings in Bangkok. The per capita income of economically active, male-headed
households who have migrated to Bangkok in the past 10 years is regressed on the age,
age squared and years of schooling of the head of the household. Expected earnings in
Bangkok are calculated using the coefficients from this regression together with the
relevant characteristics of the head of the remitting household.

Because the logit estimates of whether remitters will move to Bangkok include
generated independent variables, conventional standard errors will be incorrect.
Bootstrap standard errors based on 1,000 repetitions are reported instead. Each bootstrap
repetition involves drawing a random sample (with replacement) of the SES data,
calculating the expected earnings of receiving households and of remitting households

13
and then estimating who will move to Bangkok for the bootstrap sample of remitters.15
The standard errors are not corrected to account for the estimation of the insurance
variables. This is equivalent to assuming that the agents in the model have access to the
same data about rainfall and GDP that is used in the analysis and that they use the same
procedure that I do to come up with estimates of the variance and covariance terms.

Four estimates of the probability of moving to Bangkok are presented in Table 5.

The first two estimates (columns 1 and 2) use GDP shocks to calculate variances and
covariances. The third and fourth estimates (columns 3 and 4) use covariance and
variance measures that are based on rainfall shocks. The first estimate in Table 5
indicates that remitters are significantly more likely to move to Bangkok the higher their
expected income in the capital and that this effect diminishes as expected income gets
higher. Remitters are also more likely to move to Bangkok the higher the expected
income of the receiving household. This effect also diminishes as the expected income of
the receiving households goes up. Distance does not play a significant role in
determining who moves to Bangkok, nor do the variables that interact sending and
receiving household expected income and distance.16 In this specification, which
measures variance and covariance based on an the residuals of an ar(1) regression of
GDP for each province, the insurance variables do not have a statistically significant
effect on the decision to move to Bangkok.

The second estimates for GDP and rainfall (columns 2 and 4) allow the
coefficients on the insurance variables to vary depending on whether the remitter
supports a household who lives in an urban or a rural community. The idea is that
insurance concerns may be more important for remitters who support households in rural
areas for at least three reasons. First, rural households in the same community may face
more covariant risk than urban households because rural agricultural income is especially
sensitive to variations in weather that influence all local crops. Second, rural households
are likely to have less access to institutional/market mechanisms that could be used to
diversify provincial risk than their urban counterparts. Finally, rural households are
likely to be poorer than urban households and therefore rural households will be less
equipped to self-insure through savings or by buying and selling assets. The findings that
are reported in column 2 support this story. Remitters who give to rural areas are
significantly less likely to move to Bangkok the more it covaries with the province they
remit to (the coefficient is less than zero at an 8.5% significance level, based on a one-
sided test). Although the coefficient is not significant, remitters who support urban
households appear to be more likely to move to Bangkok the more it covaries with the
province they remit to. This suggests that the covariance of GDP between the sending
and the receiving province may measure positive aspects of moving to a place that is
similar to the place you remit to that are not captured by the income variable. These
effects appear to outweigh the insurance concerns of households who remit to urban

15
The significance levels reported in the tables are corrected for bias that is induced when the average of
the bootstrap coefficient estimates differs from the coefficient estimate which is derived from the
underlying sample.
16
The results are the same when the bus fare between Bangkok and the relevant provincial capital is used
instead of the distance in kilometers.

14
households. The likelihood of moving to Bangkok is not significantly affected by the
variance of GDP in the receiving household’s province, regardless of whether the
receiving household is rural or urban. The magnitude and the significance of the other
variables do not change when the effect of the insurance variables can differ depending
on rural/urban status of the receiving household.

When we use rainfall shocks to calculate the variance and the covariance terms,
the insurance effect is important and significant even when there are not separate
coefficients for rural and urban receivers (column 3 of Table 5). In this specification,
remitters are significantly less likely to move to Bangkok the more it covaries with the
province they remit to, as we would expect if insurance motives play a role in the
migration decisions of remitters. The effect of the receiving household’s rainfall variance
is not significantly different from zero. Using rainfall data to calculate variances and
covariances does not change the impact of most of the other explanatory variables
compared to the estimate that uses GDP data to calculate the insurance terms. One
exception is the effect of distance. While the coefficients on distance and distance
squared remain insignificant, their signs conform to the predictions of the model in this
estimate: remitters are less likely to move to Bangkok the further it is from the place they
remit to and this effect diminishes with distance. In general, rainfall has more stable time
series properties than GDP does, and rainfall measures are also less likely to be affected
by measurement error. These attributes may make covariances based on rainfall shocks
more desirable. On the other hand, the covariance terms are meant to capture the
covariance of income shocks between provinces. Rainfall has only an indirect effect on
income and the importance of rainfall for income will vary depending on the location and
the occupation of a particular household.

The last column of Table 5 presents estimates of the likelihood of moving to

Bangkok that use rainfall shocks to calculate variances and covariances and that allow the
effect of the insurance variables to depend on whether the receiving household lives in a
rural or an urban area. This estimate indicates that both remitters who support rural
households and remitters who support urban households are less likely to move to
Bangkok the more it covaries with the province that they remit to. One possibility is that
the desirable “similarity” of provinces that seems to be picked up by covariances that are
estimated from GDP shocks is not reflected in rainfall covariances.

The results discussed so far suggest that the desire to diversify provincial level
risk plays an important role in determining who moves to Bangkok, particularly for
remitters who support rural households. The next issue to consider is the importance of
insurance considerations relative to the desire to improve income by migrating. The
magnitude of the effect of the explanatory variables is described in Table 6. This table
illustrates how the average predicted probability of moving to Bangkok changes when
each of the explanatory variables in turn is increased by one standard deviation from its
mean, holding the value of the other variables fixed. This exercise is performed for the
estimates that allow the coefficients on the variance and covariance terms to differ
depending on the community type of the receiving household (columns 2 and 4 of Table
5). When the remitter’s expected income in Bangkok increases by one standard deviation

15
(or 1,500 baht), the likelihood of moving to Bangkok increases by 22%, this is a 73%
increase over the average predicted probability of moving to Bangkok of 30%. This
increase is mitigated by the effect of increases in expected income operating through
expected income squared (-18%) and the interaction of expected income in Bangkok with
distance (-5.5%). However, these changes are not measured very precisely.17 The impact
of a one standard deviation increase in the expected income of the receiving household’s
income has about one-half the effect of the same increase in the expected income of the
remitting household. If the receiving household’s income increases by one standard
deviation (or 2,849 baht), the remitter will be 9.5% more likely to move to Bangkok. The
magnitude of these effects does not depend on whether GDP or rainfall shocks are used
to measure variances and covariances.

For a remitter who supports a rural household, a one standard deviation increase
in the covariance between GDP shocks to the receiving province and Bangkok decreases
the likelihood of moving to Bangkok by 3%, a 10% decrease in the average predicted
probability of migrating to the capital. This is equivalent to decreasing expected income
in Bangkok by 200 baht per month, or 6% of average expected income. The covariance
between Bangkok and the receiving household’s province has no significant effect on
households who remit to urban households, when GDP shocks are used. The variance
terms are also insignificant in this specification. When the variance and covariance terms
are derived from rainfall shocks, a one standard deviation increase in the covariance
between rainfall shocks in Bangkok and the receiving province substantially decreases
the likelihood of moving to Bangkok for all remitters, regardless of whether the remit to
rural or urban households. For households who remit to rural households, the probability
of moving to Bangkok decreases by 7.3%, for remitters who support urban households
the probability declines by 7.8%. A 500 baht reduction (15%) in average expected
income in Bangkok would decrease the likelihood of moving to the capital by roughly the
same amount. In the rainfall specification, the variance of the receiving household’s
province plays a significant role in determining whether remitters who support rural
households will move to Bangkok. A one standard deviation increase in rainfall variance
increases the likelihood that these remitters will migrate to Bangkok by 4%. A 300 baht
increase in expected income in the capital would have the same effect.

Having established that insurance concerns play an important role in the

migration decisions of remitting households, from both a statistical and an economic
perspective, I now consider whether adding the insurance variables significantly
improves the predictive power of the estimates. Table 7 presents two estimates of the
likelihood of moving to Bangkok, neither of which includes insurance variables. The
independent variables in the first estimate correspond to an assumption of risk neutrality.
The explanatory variables that are included in the first estimate are the remitter’s
expected income in Bangkok, the receiving household’s expected income and the
distance between the receiving household’s province and Bangkok. The second estimate
in Table 7 includes all of the variables that were included in Table 5 (expected income
squared, distance squared, interactions of income and distance, etc.), but this estimate
does not include any variance or covariance measures. Adding the insurance variables
17
As was the case in Table 5, the reported standard errors are bootstrapped, based on 1000 repetitions.

16
significantly improves the explanatory power of the estimates. The likelihood ratio tests
indicate that the risk neutral model is strongly rejected against the alternative models
(estimates [2] (GDP shocks) and [4] (rainfall shocks) from Table 5) that include variance
and covariance terms whose effect varies depending on the community type of the
receiving household. The risk neutral model also produces nonsensical results. For
example, remitters are significantly less likely to move to Bangkok the higher their
expected income there. The second estimate, which includes the other variables
suggested by the quadratic utility function, delivers more sensible results. Higher
expected income in Bangkok is associated with a higher likelihood of moving to the
capital, for example. However, this estimate is still rejected in favor of including the
insurance variables, according to the likelihood ratio tests.

The next set of estimates explores the robustness of the findings. The first two
columns presented in Table 8 estimate the probability of moving to Bangkok for two
groups of remitters. The first group remits to households who are economically active,
which means that the remitting household has income from sources other than
remittances and property income. The second group remits to households who are not
economically active; their income comes only from remittances and property income.
The migration decisions of households who remit to inactive households should not be
influenced by insurance motives because the households they support will have incomes
that are largely immune from provincial risk.18 In contrast, insurance motives should play
an important role in explaining the location choices of those who remit to active
households. The estimates produce precisely these results. Remitters who remit to
active, rural households are significantly less likely to move to Bangkok the more GDP
shocks to Bangkok covary with GDP shocks to the province they remit to. Remitters
who support inactive households are not significantly influenced by any of the insurance
variables. Interestingly, remitters who support active, urban households are significantly
more likely to move to Bangkok the more it covaries with the province they remit to.
This suggests that, for this group of remitters, the advantages of moving to a place that is
similar to the place they remit to outweigh insurance concerns. The active, urban
households that they support are likely to be in a relatively good position to insure
themselves against provincial shocks for reasons that are discussed above. The
importance of the receiving households expected income also seems to vary sensibly
depending on whether the receiving households are economically active or not. For
example, the income of the receiving household is an important predictor of who moves
to Bangkok for the group of remitters who support active households. This variable is
insignificant in the estimate that looks only at remitters who support inactive households.
When we look at inactive receiving households the coefficient on the receiving
household’s income is not significant and the importance of the remitter’s income
increases. In addition, the size of the coefficient on remitters expected income in

18
Economically inactive households may in fact be subject to some provincial risk. For example, property
income from agricultural land may vary with rainfall if rents are equal to a percentage of the crop. Also,
receiving households may have retired after the remitters made their migration decisions. In any case,
insurance motives should be stronger for households who remit to active households compared to those
who remit to inactive households.

17
Bangkok is about 275% bigger in the estimate for inactive receivers compared to the
estimate for active receiving households.

The third column in Table 8 presents estimates of the likelihood of moving to

Bangkok for a sample of remitters that excludes households who send remittances to
people who live in Bangkok. The concern is that “urban” means something different in
Bangkok compared to outside the capital. Given the difference in population between
Bangkok and the next largest city, I want to make sure that households who receive
remittances and live in Bangkok are not somehow driving the results. This does not seem
to be the case. In this specification households who remit to rural households are also
less likely to move to Bangkok the more it covaries with the province they remit to. In
fact, the estimate that excludes receiving households who live in Bangkok, produces a
larger and more significant coefficient compared to Table 5, specification [2].

The last estimate in Table 8 considers the impact of sample selection. This
estimate includes only households who sent a remittance in the month prior to the survey.
The criteria for being included in all of the other estimates that have been discussed so far
is to have sent a remittance at some point in the 12 months prior to the survey.
Approximately 68% of the households who sent a remittance in the 12 months prior to
the survey are included in the more selected sample of households who sent a remittance
in the month prior to the survey. It is not clear that sample selection will significantly
bias the results (see the discussion in Section 3 for more details). However, if sample
selection is playing an important role, then the findings should change significantly when
only the more selected sample is considered. The estimates indicate that the results are
not sensitive to sample selection. Among the more selected sample, remitters who
support rural households are significantly less likely to move to Bangkok the more it
covaries with the province they remit to. If anything, this finding seems to be larger and
a bit more significant for the more selected sample or remitters.

5. Conclusions

This paper examines whether insurance motives play an important role in

explaining the location choices of migrants who support other households through
remittances. The results indicate that insurance motives do influence migration patterns in
important ways. Empirical estimates that include insurance variables perform better than
estimates that only consider income maximization. Remitters are significantly less likely
to move to Bangkok the more it covaries with the province they remit to. The effect is
economically substantial – a one standard deviation increase in the covariance of income
shocks reduces the likelihood of moving to Bangkok by 3% to almost 8%, depending on
the estimate. This corresponds to a reduction of average income in Bangkok of 6% to
15%. The effect of insurance concerns is particularly important for remitters who
support rural households. Rural households are usually poorer and are therefore less able
to self-insure than their wealthier urban counterparts. In addition, national level
institutions (like banks and insurance companies) that could be used to mitigate common
local risk are less available to rural households.

18
 These findings are robust to alternative methods of measuring the covariance of
income shocks and to sample selection. Perhaps even more convincingly, the insurance
variables do not significantly effect the migration decision of a group of remitters for
whom insurance considerations should not be important. There is some tentative
evidence that migrants who remit to urban households may find locations that covary
more with the province they remit to more attractive. This suggests that measures of the
covariance of income shocks may also capture other aspects of similarity between two
places that might translate into utility or income gains for the migrant. This finding
seems to depend on how income shocks are measured. When income shocks are
measured using rainfall instead of GDP, remitters who support urban households are also
less likely to move to Bangkok the more it covaries with the province they remit to.

The evidence suggests that migration flows from rural areas will be sensitive to
increases in local opportunities for insurance. Migration flows to Bangkok, for example,
might be substantially higher if insurance concerns did not affect the decision to move to
Bangkok. According to the estimates described above, the average predicted probability
of moving to the capital would increase from 30% to 50% if the covariance of rainfall
with the Bangkok were zero for all provinces. Given the number of internal and
international migrants who support family members in their origin communities where
there are only limited sources of insurance, the findings presented in this paper indicate
that insurance motives may be an important factor in explaining migration patterns more
generally.

19
 References
Adulavidhaya, Kamphol and Tongroj Onchan. “Migration and Agricultural
Development of Thailand: Past and Future.” in Hauser et. al. eds., Urbanization
and Migration in ASEAN Development, Tokyo: National Institute for Research
Advancement, 1985.

Becker, Gary. A Treatise on the Family. Cambridge, Massachusetts: Harvard University

Press, 1981.

____________ and Bronars, S. G. "Immigration and the Family." Journal of Labor

Economics 9(April 1991):123-148.

Cochrane, John H. "A Simple Test of Consumption Insurance." Journal of Political

Economy 99(1991):957-976.

Cox, Donald and Jimenez, Emmanuel. "Achieving Social Objectives Through Private
Transfers, A Review." The World Bank Research Observer. Volume 5, no. 2 (July
1990), pp. 205-18.

Da Vanzo, Julie. "Why Families Move." RAND Report R-1972-DOL. Santa Monica,
CA. 1976.

Deaton, Angus. "On Risk, Insurance and Intra-Village Consumption Smoothing."

Manuscript, Princeton University, 1990.

Feder, Gershon. et. al. Land Policies and Farm Productivity in Thailand. Baltimore:
Johns Hopkins University Press, 1988.

Grimard, Franque. "Household Consumption Through Ethnic Ties: Evidence from

COTE D'IVOIRE." Manuscript, Princeton University, 1992.

Heckman, James and Schienkman, Jose. "The Importance of Bundling in a Gorman-

Lancaster Model of Earnings." The Review of Economic Studies (April 1987):243-
256.

Katz, E. and Stark, Oded. "Labor Migration and Risk Aversion in Less Developed
Countries." Journal of Labor Economics 4(1986):134-149.

Lucas, Robert E.B. and Stark, Oded. "Motivations to Remit: Evidence from Botswana."
Journal of Political Economy 93(1985):901-18.

Mace, Barbara J. "Full Insurance in the Presence of Aggregate Uncertainty." Journal of

Political Economy 99(1991):928-56.

Massey, Douglas, et. al. "Theories of International Migration: An Integration and

Appraisal. Manuscript.

20
McFadden, Daniel. "Econometric Analysis of Qualitative Response Models," in Z.
Griliches and M. Intrilligator, eds., Handbook of Econometrics, Vol. 2,
Amsterdam: North Holland, 1984.

Mincer, Jacob. "Family Migration Decisions." Journal of Political Economy 86(October

1978):749-773.

Miller, Douglas and Anna Paulson. “Informal Insurance and Moral Hazard: Gambling
and Remittances in Thailand.” Manuscript. Northwestern University, 1999.

Morduch, Jonathan. "Consumption Smoothing Across Space: Tests for Village-Level

Responses to Risk." Manuscript. Harvard University, 1990.

Newey, Whitney. "A Method of Moments Interpretation of Sequential Estimators."

Economic Letters 14 (1984): 201-206.

Paxson, Christina H. "Using Weather Variability to Estimate the Response of Savings to

Transitory Income in Thailand." American Economic Review 82 (March 1992)15-
33.

____________. "Consumption and Income Seasonality in Thailand." Journal of Political

Economy (1993).

Rashid, Mansoora. "Rural Consumption: The Evidence from Pakistan." Dissertation,

University of Chicago, 1990.

Rosen, Sherwin. "Linear Skill Aggregation." Journal of Human Resources (1982).

Rosenzweig, Mark R. and Stark, Oded. "Consumption Smoothing, Migration and

Marriage: Evidence from Rural India." Journal of Political Economy
97(1989):905-926.

Russell, Sharon S. "Migrant Remittances and Development." International Migration

(1992) 30(3):267-287.

Sandell, Steven H. "The Economics of Family Migration." NLS Report on Dual Careers,
Volume 4. Columbus, Ohio: Center for Human Resources Research. December,
1975.

Sjaastad, Larry A. "The Costs and Returns of Human Migration." Journal of Political
Economy 70(1962).

Stark, Oded and Bloom, David. "The New Economics of Labor Migration." American
Economic Review, May 1985:173-187.

21
Stark, Oded and Levhari, D. "On Migration and Risk in LDCs." Economic Development
and Cultural Change 31(1982):191-196.

Stark, Oded. The Migration of Labor. Cambridge, MA: Basil Blackwell, 1991.

Todaro, M. "A Model of Labor Migration and Urban Development in Less Developed
Countries." American Economic Review 59(1969):138-48.

Townsend, Robert M. "Risk and Insurance in Village India." Econometrica, 62(3) May,
1994:539-591.

______________. "Financial Systems in Northern Thai Villages." Quarterly Journal of

Economics, University of Chicago, 1993.

Meteorological Department. "Monthly Rainfall in Millimeters by Weather Station,"

unpublished printout, Ministry of Communications, Bangkok, 1951-1985.

National Statistics Office. 1988 Socio-Economic Survey Data Tape, Bangkok: Office of
the Prime Minister. 1988.

__________________. Statistical Yearbook of Thailand, 1985. Bangkok: Office of the

Prime Minister, 1985.

__________________. Statistical Yearbook of Thailand, 1989. Bangkok: Office of the

Prime Minister, 1989.

22
 Table 1: Characteristics of Sample Households, by Remittance Status

Give = 0, Give = 0, Give = 1, Give = 1,

Get = 0 Get = 1 Get = 0 Get = 1
# Household 7149 2174 1503 219
% of Sample (64.73) (19.68) (13.61) (1.98)
Characteristics of Household
Age of head 44.01 51.05 39.42 46.00
(14.31) (16.77) (12.66) (15.31)
Education of head 5.23 4.84 7.80 7.21
(years) (4.02) (4.22) (5.01) (5.25)
Income 1543.36 1561.49 3023.64 2593.08
(1986.06) (1679.84) (2617.24) (1847.82)
Size 4.11 3.60 3.31 3.59
(1.76) (1.82) (1.73) (1.83)
% Male head 82.67 58.37 83.97 63.01
% Urban 32.49 31.92 54.96 42.92
% Migrant 20.32 17.34 40.59 31.05
Regional Distribution (Percent)
North 22.24 22.08 14.57 15.98
Northeast 21.99 29.25 16.63 29.22
Central 21.11 20.29 18.16 14.16
South 16.97 10.63 15.97 12.33
Bangkok 17.69 17.76 34.66 28.31
Occupational Distribution (Percent)
Farmers 34.33 23.18 12.77 17.35
Entrepreneurs 19.61 11.73 22.69 14.61
Professionals 7.02 4.65 17.10 20.09
Laborers 11.06 6.72 2.86 1.37
Other Employees 25.07 16.47 41.92 24.66
Inactive 2.91 37.26 2.66 21.92
Notes: "Give" means someone in the household reported giving a cash or in-kind remittance during the 12 months preceding the survey. "Get" means someone
in the household reported receiving a remittance during the 12 months preceding the survey. Income is in 1988 per capita (standardized using adult male
equivalents) Thai baht per month (25 baht = $1). "Migrant" means the household has changed amphoes (county) in the last ten years. Standard deviations are in
parentheses.

23
 Table 2: Characteristics of Sample Remittances

Get = 1 Give = 1
Delivery Method (%)
Person to Person Delivery 56.90 60.94
Money Order 27.60 29.61
Other Delivery Method 15.5 9.45
Relationship (%) Who Remitted Who Received
Spouse 15.96 3.53
Son or Daughter 57.59 29.21
Parents 13.11 54.49
Brother or Sister 5.38 7.32
Other 7.96 5.45
% For Education 9.34 30.67
Size of Remittance
Last Year: Cash/Mo. 994.27 713.89
Standard deviation (2256.21) ( 970.39)
# of households 2137 1486

Last Year: In-Kind/Mo. 237.32 142.44

Standard deviation (452.85) (176.18)
# of households 232 108

Last Month: Cash 1655.30 1173.78

Standard deviation (3585.24) (1257.23)
# of households 1514 1059

Last Month: In-Kind 887.27 793.63

Standard deviation (1461.36) (1079.10)
# of households 145 60
Remittance as % of Total Income (last Month) 33.20 16.35
Notes: Remittances are in 1988 Thai baht (25 baht = $1) per household. See Table 1 for definition of "Give" and "Get". Standard deviations are in
parentheses.

24
 Table 3: Income Estimates for Receiving Households
North Northeast Central South Bangkok
β s.e. β s.e. β s.e. β s.e. β s.e.
Age of Head 26.080 20.801 22.546 37.206 21.555 15.975 81.884‡ 29.352 115.728‡ 30.568
Age of Head2 -0.187 0.197 -0.071 0.361 -0.216 0.146 -0.534* 0.278 -0.859‡ 0.310
Years of Schooling, Head 43.901 44.026 118.232 91.212 -41.241 33.950 41.822 66.865 139.687† 65.817
Years of Schooling, Head2 3.642 2.582 3.276 5.377 8.925‡ 2.188 5.254 3.822 0.721 3.491
Farm (=1 if farm HH) -52.769 148.754 221.574 199.898 285.454‡ 113.367 -146.676 232.558 536.371 613.387
Urban (=1 if urban HH) 534.140‡ 151.043 -300.100 284.547 319.879‡ 105.627 330.078 231.858 410.780 312.447
Constant -142.043 554.050 -1065.619 984.415 344.926 432.864 -2270.412‡ 855.014 -2238.531‡ 807.418
Adjusted R2 9.6% 2.5% 10.9% 6.3% 9.7%
Number of Observations 660 850 626 353 563
The symbols *, †, and ‡ indicate that the coefficient is significantly different from zero at at least the 10 percent, 5 percent and 1 percent level, respectively.

Table 4: Estimates of Income in Bangkok

Active, Male-headed Households who have Migrated to Bangkok in Past 10 years
Bangkok
β s.e.
Age of Head 115.033† 46.729
Age of Head2 -1.128* 0.599
Years of Schooling, Head 296.102‡ 19.339
Constant -1532.503* 858.576
Adjusted R2 28.3%
Number of Observations 641
The symbols *, †, and ‡ indicate that the coefficient is significantly different from zero at at least the 10
percent, 5 percent and 1 percent level, respectively.

25
 Table 5: Estimates which Include Insurance Variables

Logit Estimates of the Probability of Locating in Bangkok, Remitting Households

GDP shocks Rainfall Shocks
[1] [2] [3] [4]
β s.e. β s.e. β s.e. β s.e.
E[Income], Remitter in Bangkok 706.700† 356.600 709.700† 356.300 706.700† 356.600 705.900† 356.500
E[Income], Receiver 168.200‡ 96.200 167.900† 96.200 168.200‡ 96.200 165.100‡ 96.800
Distance to Bangkok 391.000 22849.600 1321.100 22874.800 -5439.200 19103.000 -4716.100 18889.900
E[Income]2, Remitter in Bangkok -0.106‡ 0.046 -0.106‡ 0.046 -0.106‡ 0.046 -0.107‡ 0.046
2 ‡ ‡ ‡
E[Income] , Receiver -0.005 0.008 -0.005 0.008 -0.005 0.008 -0.005‡ 0.008
Distance to Bangkok2 -2.550 20.800 -2.960 20.900 0.511 16.000 0.043 15.800
E[Income], Remitter×E[Income], Receiver 0.010 0.024 0.010 0.024 0.010 0.024 0.012 0.024
E[Income], Remitter×Distance to Bangkok -0.250 0.215 -0.256 0.216 -0.250 0.215 -0.227 0.213
E[Income], Receiver×Distance to Bangkok 0.028 0.116 0.031 0.117 0.028 0.116 0.027 0.118
Covariance of Receiver’s province and Bangkok -1.460 9.840 . . -29.000* 41.700 . .
Covariance – Urban Receiver . . 0.537 10.100 . . -24.100* 41.900
Covariance – Rural Receiver . . -12.700 14.000 . . -26.300* 41.700
Variance of Receiver’s province -1.700 2.340 . . 8.500 21.000 . .
Variance – Urban Receiver . . -1.270 2.620 . . 6.390 20.400
Variance – Rural Receiver . . -1.750 2.670 . . 10.700 20.700
Constant -1609149 2172208 -2045874 2231063 1414703 3441931 966430 3330124
χ2-test for joint significance of province controls 105.53 102.47 109.57 102.50
Prob > χ2 0.00 0.00 0.00 0.00
Adjusted R2 10.1% 10.2% 10.1% 10.2%
Number of Observations 1670 1670 1670 1670
Notes: reported coefficients and standard errors are the estimated ones multiplied by 1,000,000. The reported standard errors are bootstrapped, based on 1,000
repetitions. The symbols *, †, and ‡ indicate that the coefficient is significantly different from zero at at least the 10 percent, 5 percent and 1 percent level,
respectively. In addition to the independent variables reported in the table, the estimates also include controls for the province of the receiving household.

26
 Table 6: Average Change in Predicted Probability of Locating in Bangkok from 1 Standard Deviation Increase in Dependent Variable
GDP shocks Rainfall Shocks
Separate Rural and Urban Effects Separate Rural and Urban Effects
From estimate [2], Table 5 From estimate [4], Table 5
change in prob s.e. change in prob s.e.
E[Income], Remitter in Bangkok 0.220† 0.100 0.219† 0.100
E[Income], Receiver 0.095‡ 0.053 0.093‡ 0.053
Distance to Bangkok 0.088 0.298 -0.210 0.275
E[Income]2, Remitter in Bangkok -0.182‡ 0.048 -0.182‡ 0.048
E[Income]2, Receiver -0.048‡ 0.036 -0.049‡ 0.037
2
Distance to Bangkok -0.152 0.271 0.003 0.253
E[Income], Remitter×E[Income], Receiver 0.030 0.069 0.035 0.070
E[Income], Remitter×Distance to Bangkok -0.055 0.041 -0.049 0.041
E[Income], Receiver×Distance to Bangkok 0.009 0.033 0.008 0.033
Covariance – Urban Receiver 0.005 0.058 -0.078* 0.089
Covariance – Rural Receiver -0.027 0.025 -0.073* 0.073
Variance – Urban Receiver -0.018 0.033 0.022 0.058
Variance – Rural Receiver -0.029 0.033 0.039* 0.064
Average Predicted Probability of Locating in Bangkok 0.303 0.013 0.303 0.013
The reported standard errors are bootstrapped, based on 1,000 repetitions. The symbols *, †, and ‡ indicate that the change in probability is significantly
different from zero at at least the 10 percent, 5 percent and 1 percent level, respectively.

27
 Table 7: Estimates which Exclude Insurance Variables

Logit Estimates of the Probability of Locating in Bangkok, Remitting Households

Linear Model Quadratic Model
[1] [2]
β s.e. β s.e.
E[Income], Remitter in Bangkok -115.000† 61.200 706.300† 357.200
E[Income], Receiver 129.400‡ 28.400 167.900‡ 96.200
Distance to Bangkok -2261.500 7598.200 -3335.900 18413.000
E[Income]2, Remitter in Bangkok . . -0.106‡ 0.046
2
E[Income] , Receiver . . -0.005‡ 0.008
Distance to Bangkok2 . . 0.076 17.200
E[Income], Remitter×E[Income], Receiver . . 0.011 0.024
E[Income], Remitter×Distance to Bangkok . . -0.258 0.215
E[Income], Receiver×Distance to Bangkok . . 0.031 0.116
Constant 247687.900 6153185.000 -594031.100 1513631.000
χ2-test for joint significance of province controls 113.91 109.73
Prob > χ2 0.00 0.00
Adjusted R2 9.0% 10.1%
Likelihood Ratio Test v. Estimate [2], Table 5
χ2-statistic 28.19 5.59
Prob > χ2 0.0001 0.0181
Likelihood Ratio Test v. Estimate [4], Table 5
χ2-statistic 28.35 5.75
Prob > χ2 0.0001 0.0165
Notes: reported coefficients and standard errors are the estimated ones multiplied by 1,000,000. The reported standard errors are bootstrapped, based on 1,000
repetitions. The symbols *, †, and ‡ indicate that the coefficient is significantly different from zero at at least the 10 percent, 5 percent and 1 percent level,
respectively. In addition to the independent variables reported in the table, the estimates also include controls for the province of the receiving household.

28
 Table 8: Robustness Checks

Logit Estimates of the Probability of Locating in Bangkok, Remitting Households, Including Insurance Variables Based on GDP Shocks
Active v. Inactive Receiving Households Exclude Households Include only Remitters
who Remit to Bangkok who Remitted Last
Active Receivers Inactive Receivers Month
[1] [2] [3] [4]
β s.e. β s.e. β s.e. β s.e.
E[Income], Remitter in Bangkok 355.200 422.700 989.400‡ 430.000 497.300 417.100 717.700† 438.500
E[Income], Receiver 873.400‡ 227.400 47.400 103.000 317.500‡ 173.800 92.200 117.400
Distance to Bangkok 1265.200 1739.000 2069.200* 1589.300 694.000 27829.100 -312.700 51734.800
E[Income]2, Remitter in Bangkok -0.086* 0.054 -0.134‡ 0.055 -0.104‡ 0.051 -0.129‡ 0.059
2 ‡ †
E[Income] , Receiver -0.055 0.026 -0.002 0.007 -0.005 0.018 -0.013‡ 0.009
Distance to Bangkok2 -2.310* 1.470 -2.040 1.020 -2.960 24.600 -2.600 50.100
E[Income], Remitter×E[Income], Receiver -0.006 0.054 0.025 0.025 -0.010 0.039 0.046† 0.026
E[Income], Remitter×Distance to Bangkok 0.019 0.332 -0.469 0.306 0.230 0.305 -0.261 0.296
E[Income], Receiver×Distance to Bangkok -0.066 0.256 -0.020 0.117 -0.083 0.183 0.133 0.173
Covariance – Urban Receiver 8.900† 13.200 1.480 1.480 -9.530 17.000 -2.100 18.100
Covariance – Rural Receiver -18.000‡ 6.230 -1.510 6.690 -19.300* 17.300 -27.500* 22.600
Variance – Urban Receiver -4.270† 13.000 -0.088 0.953 -0.232 7.470 -1.860 3.940
Variance – Rural Receiver -4.380‡ 1.440 0.027 1.380 -0.659 7.550 -2.920 3.660
Constant -2448615‡ 870048 -3065001‡ 822291 -1983965 3417472 -1167059 3810718
2
Adjusted R 13.0% 7.8% 12.0% 11.9%
Number of Observations 694 1111 1193 1138
Notes: reported coefficients and standard errors are the estimated ones multiplied by 1,000,000. The reported standard errors are bootstrapped, based on 1,000
repetitions. The symbols *, †, and ‡ indicate that the coefficient is significantly different from zero at at least the 10 percent, 5 percent and 1 percent level,
respectively. Estimates [3] and [4] also include controls for the province of the receiving household.

29