IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/38339.html
   My bibliography  Save this paper

Does the insurance effect of public and private transfers favor financial deepening? evidence from rural Nicaragua

Author

Listed:
  • Hernandez-Hernandez, Emilio
  • Sam, Abdoul G.
  • Gonzalez-Vega, Claudio
  • Chen, Joyce J.

Abstract

The literature suggests Conditional Cash Transfers (CCT) and remittances may protect poor households from income risk. We present a theoretical framework that explores how this ‘insurance’ effect can change households’ decision to apply for a loan via changes in credit demand and supply. Empirical evidence from poor rural households in Nicaragua shows CCTs did not affect loan requests while remittances increased them. The risk protection provided by remittances seems stronger, relative to CCTs, such that improvements on borrowers’ expected marginal returns to a loan or on creditworthiness more than offset decreasing returns to additional income. This suggests those transfers that best protect households from income risk favor financial deepening in the context of segmented markets.

Suggested Citation

  • Hernandez-Hernandez, Emilio & Sam, Abdoul G. & Gonzalez-Vega, Claudio & Chen, Joyce J., 2012. "Does the insurance effect of public and private transfers favor financial deepening? evidence from rural Nicaragua," MPRA Paper 38339, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:38339
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/38339/1/MPRA_paper_38339.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Astrid Grasdal, 2001. "The performance of sample selection estimators to control for attrition bias," Health Economics, John Wiley & Sons, Ltd., vol. 10(5), pages 385-398, July.
    2. Bell, Clive, 1988. "Credit markets and interlinked transactions," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 16, pages 763-830, Elsevier.
    3. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 2-16, January.
    4. Conning, Jonathan & Udry, Christopher, 2007. "Rural Financial Markets in Developing Countries," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 56, pages 2857-2908, Elsevier.
    5. Fafchamps, Marcel & Gubert, Flore, 2007. "The formation of risk sharing networks," Journal of Development Economics, Elsevier, vol. 83(2), pages 326-350, July.
    6. Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, vol. 53(2), pages 339-371, August.
    7. Vivas Viachica, Elgin Antonio, 2007. "Migración interna en Nicaragua: descripción actualizada e implicancias de política, con énfasis en el flujo rural-urbano," Población y Desarrollo 7223, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. repec:dau:papers:123456789/4392 is not listed on IDEAS
    9. Berthelemy, Jean-Claude & Varoudakis, Aristomene, 1996. "Economic Growth, Convergence Clubs, and the Role of Financial Development," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 300-328, April.
    10. Mariapia MENDOLA, 2005. "Migration and technological change in rural households: complements or substitutes?," Departmental Working Papers 2005-15, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    11. Taylor, J. Edward & Martin, Philip L., 2001. "Human capital: Migration and rural population change," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 9, pages 457-511, Elsevier.
    12. J. Edward Taylor & Scott Rozelle & Alan deBrauw, 1999. "Migration, Remittances, and Agricultural Productivity in China," American Economic Review, American Economic Association, vol. 89(2), pages 287-291, May.
    13. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    14. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
    15. B. L. Gardner & G. C. Rausser (ed.), 2001. "Handbook of Agricultural Economics," Handbook of Agricultural Economics, Elsevier, edition 1, volume 1, number 2.
    16. B. L. Gardner & G. C. Rausser (ed.), 2001. "Handbook of Agricultural Economics," Handbook of Agricultural Economics, Elsevier, edition 1, volume 1, number 1.
    17. Stark, Oded & Levhari, David, 1982. "On Migration and Risk in LDCs," Economic Development and Cultural Change, University of Chicago Press, vol. 31(1), pages 191-196, October.
    18. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    19. Alderman, Harold & Hoddinott, John F., 2007. "Growth-promoting social safety nets," 2020 vision briefs BB16 Special Edition, International Food Policy Research Institute (IFPRI).
    20. Lucas, Robert E B, 1987. "Emigration to South Africa's Mines," American Economic Review, American Economic Association, vol. 77(3), pages 313-330, June.
    21. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 27-28, January.
    22. Mendola, Mariapia, 2008. "Migration and technological change in rural households: Complements or substitutes?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 150-175, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Khushbu Mishra & Abdoul G. Sam & Gracious M. Diiro & Mario J. Miranda, 2020. "Gender and the dynamics of technology adoption: Empirical evidence from a household‐level panel data," Agricultural Economics, International Association of Agricultural Economists, vol. 51(6), pages 857-870, November.
    2. Waidler, J. & Hagen-Zanker, J. & Gassmann, F. & Siegel, M., 2014. "Do remittances and social assistance have different impacts on expenditure patterns of recipient households?: The Moldovan case," MERIT Working Papers 2014-072, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mendola, Mariapia, 2008. "Migration and technological change in rural households: Complements or substitutes?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 150-175, February.
    2. Mariapia Mendola, 2004. "Migration and Technological Change in Rural Households: Complements or Substitutes?," Development Working Papers 195, Centro Studi Luca d'Agliano, University of Milano.
    3. Juan M. Gallego & Mariapia Mendola, 2013. "Labour Migration and Social Networks Participation in Southern Mozambique," Economica, London School of Economics and Political Science, vol. 80(320), pages 721-759, October.
    4. Marcus H. Böhme, 2015. "Does migration raise agricultural investment? An empirical analysis for rural Mexico," Agricultural Economics, International Association of Agricultural Economists, vol. 46(2), pages 211-225, March.
    5. Atsede Desta Tegegne & Marianne Penker, 2016. "Determinants of rural out-migration in Ethiopia: Who stays and who goes?," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 35(34), pages 1011-1044.
    6. Görlich, Dennis & Trebesch, Christoph, 2006. "Mass migration and seasonality: evidence on Moldova's labour exodus," Kiel Advanced Studies Working Papers 435, Kiel Institute for the World Economy (IfW Kiel).
    7. repec:got:cegedp:56 is not listed on IDEAS
    8. Arslan, Aslihan & Belotti, Federico & Lipper, Leslie, 2017. "Smallholder productivity and weather shocks: Adoption and impact of widely promoted agricultural practices in Tanzania," Food Policy, Elsevier, vol. 69(C), pages 68-81.
    9. Ayalew Ali, Daniel & Deininger, Klaus, 2012. "Causes and implications of credit rationing in rural Ethiopia : the importance of spatial variation," Policy Research Working Paper Series 6096, The World Bank.
    10. Feng Hu, 2013. "Does migration benefit the schooling of children left behind?," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 29(2), pages 33-70.
    11. Mariapia MENDOLA, 2005. "Migration and technological change in rural households: complements or substitutes?," Departmental Working Papers 2005-15, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    12. Catalina Herrera Almanza & David E. Sahn, 2020. "Childhood determinants of internal youth migration in Senegal," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 43(45), pages 1335-1366.
    13. Ali, Daniel Ayalew & Deininger, Klaus & Duponchel, Marguerite, 2014. "Credit constraints, agricultural productivity, and rural nonfarm participation : evidence from Rwanda," Policy Research Working Paper Series 6769, The World Bank.
    14. Conning, Jonathan & Udry, Christopher, 2007. "Rural Financial Markets in Developing Countries," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 56, pages 2857-2908, Elsevier.
    15. Sylvie Démurger & Siwar Khelifa & Béatrice Rey, 2023. "Rural-urban migration as a risk coping strategy: The role of income differentials," IRENE Policy Reports 23-03, IRENE Institute of Economic Research.
    16. Ubaid Ali & Mazhar Mughal & Lionel de Boisdeffre, 2023. "Migrant remittances, agriculture investment and cropping patterns," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(3), pages 899-920, September.
    17. Andrei Markevich & Ekaterina Zhuravskaya, 2018. "The Economic Effects of the Abolition of Serfdom: Evidence from the Russian Empire," American Economic Review, American Economic Association, vol. 108(4-5), pages 1074-1117, April.
    18. Anderson, Michael, 2008. "Safety for whom? The effects of light trucks on traffic fatalities," Journal of Health Economics, Elsevier, vol. 27(4), pages 973-989, July.
    19. Ciani Emanuele & Fisher Paul, 2019. "Dif-in-Dif Estimators of Multiplicative Treatment Effects," Journal of Econometric Methods, De Gruyter, vol. 8(1), pages 1-10, January.
    20. Alberto Galasso & Mark Schankerman & Carlos J. Serrano, 2013. "Trading and enforcing patent rights," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 275-312, June.
    21. Mustafa Özer & Jan Fidrmuc & Mehmet Ali Eryurt, 2018. "Maternal education and childhood immunization in Turkey," Health Economics, John Wiley & Sons, Ltd., vol. 27(8), pages 1218-1229, August.

    More about this item

    Keywords

    Credit markets; migration; conditional cash transfers; Nicaragua;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:38339. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.