Remittances as insurance: evidence from Mexican immigrants

We argue that remittances are, in part, transferred to the home country to purchase family-provided insurance and self-insurance. We use data on Mexican immigrants with work experience in the United States to capture the motives for sending remittances and use a novel approach to test for the insurance motive by relating host economy risk levels to remittance flows. We find that increases in income risk significantly raises both the propensity and the proportion of labor earnings sent home for family-provided insurance and for self-insurance.