Job Market Paper

Reducing Migration Uncertainty: Conditional Unemployment Insurance for Kenyan Migrants 

[World Bank blog]

Migration to cities can be a gamble for the rural poor in developing countries: a trade-off between potential higher urban income and foregone rural earnings. This paper tests whether mitigating short-term income loss associated with migration can induce more young rural Kenyans to move to cities. I offer 700 young male workers across randomized villages in rural Kenya access to conditional unemployment insurance, which provides workers 4 USD for each day of unemployment, conditional on migration to Nairobi. Access to this program more than triples the migration rate compared to control in the short run, and results in more persistent moves, measured over a year after the insurance program ends. These migration effects are also larger than those of an unconditional cash transfer in a complementary treatment arm. While not evident initially when the insurance was available, I observe positive treatment effects on income for the insurance group, 1.5 years after its conclusion. The unemployment insurance induces migrants who are more risk averse and have lower baseline income, suggesting that a safety net may lower the opportunity cost and perceived risk of migrating.  Overall, the evidence shows that when migration risks are insured, more rural workers are willing to take the gamble of urban migration in pursuit of higher long-term earnings.