Mobile money remittances to cope with aggregate shocks: Urban migrants and rural families under the COVID-19 lockdown in Bangladesh

In developing economies, rural households send their members to urban areas to cope with idiosyncratic shocks by sharing resources through internal remittances, which are more prevalent than international remittances. However, there is limited evidence on the role of internal remittances in risk-sharing against aggregate shocks. We analyze the seven-round panel of 723 urban migrant workers paired with their rural families in Bangladesh, covering the pre- and post-lockdown period for COVID-19. During the lockdown, urban migrants and their rural families experienced substantial income losses, particularly severe in urban areas. Our event study analysis suggests that urban migrants and their rural families coped with the aggregate income shock by sharing resources through internal remittances rather than relying on other shock-coping strategies, including selling assets or borrowing from neighbors. Although the travel restrictions prevented urban migrants from carrying remittances by hand, they could continue sending remittances via mobile money, mitigating the negative impact on the welfare of rural families. Moreover, by reducing the amount of remittances they had to send, urban migrants also mitigated their welfare loss. Together, they could fully smooth food consumption and partially smooth general consumption. We support our argument with a novel machine-learning technique.