Migration, Risk and Liquidity Constraints in El Salvador

This paper utilizes panel data from El Salvador to investigate the use of trans-national migration as an ex post risk management strategy. We show that adverse agricultural conditions in El Salvador increase both migration to the US and remittances sent back to El Salvador. We show that, in the absence of any agricultural shocks, the probability that a household sent members to the US would have decreased by 24.26%, on average. We also show that the 2001 earthquakes reduced net migration to the US. A one standard deviation increase in earthquake damage reduced the average probability of northward migration by 37.11%. The evidence suggests that the effects of the earthquakes had more to do with households retaining labor at home to cope with the effects of the disaster rather than the earthquakes disrupting migration financing.