Underinvestment in a Profitable Technology: The Case of Seasonal Migration in Bangladesh

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 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 such that failed migration is very costly. We document…

• IG
  International Growth Centre
• AA
  Australian Agency for International Development