Risk Attitudes and Household Migration Decisions

Abstract

This paper analyses the relation between risk attitudes and household migration decisions. Using data of rural-urban migrants in China and their family members left behind, we obtain three key findings: (i) conditional on migration gains, less risk averse individuals are more likely to migrate; (ii) conditional on own risk aversion, individuals are more likely to migrate the higher the risk aversion of the other household members; and (iii) conditional on average risk aversion, households with more dispersed risk preferences are more likely to send migrants. These findings are in line with a stylized model that we develop in the first part of the paper. Our results provide evidence that the distribution of risk attitudes within the household affects whether a migration takes place and who will emigrate. They also suggest that the risk diversification gain to other household members may lead to migrations that would not take place when decisions were made on individual level.