In terms of possible mechanisms through which migration influenced labor supply, de Brauw and Giles (2018) finds that out-migration from the village leads to labor reallocation across activities, and labor allocation changes differ by initial wealth tercile. Agricultural labor days decline among poorer households, who are also more likely to become migrants and provide a relatively larger increase in days spent working outside the home township.<sup>18</sup> More affluent households, by contrast, increase labor supply to local non-agricultural activities, potentially reflecting general equilibrium effects of increased local opportunities as migrants remit earnings.

Multiple studies also show evidence that migration increases rural migrant households’ investment in productive assets.<sup>19</sup> de Brauw and Giles (2018) concludes that poorer households invest more in housing and durable goods, while more affluent households invest more in non-agricultural productive assets.<sup>20</sup> The findings showing a positive impact of migration on consumption suggest that migration may be a long-term livelihood strategy for rural residents, as income gains associated with migration are treated as one source of permanent income and used to support current consumption. This conclusion contrasts with the findings in some countries where remittances are used primarily for to support investment. For example, in Philippines increases in remittances from abroad, often the product of large and exogenous exchange rate shocks, have negligible effects on household consumption but large effects on household investments in the form of education expenditures and entrepreneurial activities (Yang 2008). And households in Guatemala receiving internal or international remittances also invest more on education, in addition to increasing housing expenditures (Adams and Cuecuecha, 2010).

# **4.3 Coping with Risks**

Apart from its positive impact on income, consumption and/or investment, migration also plays an important role in mitigating risks, serving as an _ex-post_ response to a realized shock and an _ex-ante_ strategy for income diversification. A long literature in development economics has recognized that the ability to diversify income sources provides a means for poorer households to reduce exposure to consumption risk (Dercon, 2002; Morduch, 1995; Morten, 2019). Matching the RCRE village and household surveys to local rainfall data, Giles (2006) finds that increased access to migrant employment

> 18This finding is not inconsistent with the idea that poorer households may limit migration due to credit constraints.

> 19 In contrast, two studies examining the direct impact of remittances, without adequately addressing migration selection based on unobservables, argue that rural households use remittances largely for consumption, not investment, purposes (Démurger and Wang, 2016; Zhu et al., 2014).

> 20 These findings are somewhat consistent with an early study showing that during 1995-2000, households with migrant members in non-poor villages spent more on housing and durable goods but not productive investments, while migration does not affect either type of investment for households in poor areas (de Brauw and Rozelle 2008).

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