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Underinvestment in a profitable technology: the case of seasonal migration in Bangladesh

Bryan, Gharad, Chowdhury, Shyamal and Mobarak Mushfiq, Ahmed (2014) Underinvestment in a profitable technology: the case of seasonal migration in Bangladesh. Econometrica, 82 (5). pp. 1671-1748. ISSN 0012-9682

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Identification Number: 10.3982/ECTA10489

Abstract

Hunger during pre-harvest lean seasons is widespread in the agrarian areas of Asia and Sub-Saharan Africa. We randomly assign an $8.50 incentive to households in rural Bangladesh to temporarily out-migrate during the lean season. The incentive induces 22% of households to send a seasonal migrant, their consumption at the origin increases significantly, and treated households are 8–10 percentage points more likely to re-migrate 1 and 3 years after the incentive is removed. These facts can be explained qualitatively by a model in which migration is risky, mitigating risk requires individual-specific learning, and some migrants are sufficiently close to subsistence that failed migration is very costly. We document evidence consistent with this model using heterogeneity analysis and additional experimental variation, but calibrations with forward-looking households that can save up to migrate suggest that it is difficult for the model to quantitatively match the data. We conclude with extensions to the model that could provide a better quantitative accounting of the behavior.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/%28...
Additional Information: © 2014 The Econometric Society
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
J Political Science > JV Colonies and colonization. Emigration and immigration. International migration
T Technology > T Technology (General)
Sets: Departments > Economics
Date Deposited: 12 Nov 2014 11:43
Last Modified: 20 Jul 2019 01:55
Funders: AusAID, International Growth Centre, U.S. Department of Labor
URI: http://eprints.lse.ac.uk/id/eprint/60152

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