Conditional Unemployment Insurance to Incentivize Rural-Urban Migration

Study Context

Rural-to-urban migration has long been viewed as a key mechanism for economic development that offers the potential to increase incomes for migrants while supporting rural households through remittances. Despite these gains, many individuals in low-income settings remained in subsistence agriculture, which suggests the presence of significant barriers to migration.

Prior research showed that reducing upfront migration costs, such as transportation expenses, information frictions, or insecure property rights, could increase migration and improve welfare. However, qualitative fieldwork conducted in Kenya in 2022 revealed a different constraint. Young rural adults consistently emphasized the risks associated with urban labor markets, particularly job instability and the high cost of living. Many migrants delayed moving until they secured employment, yet the jobs available remotely were often temporary, leading to repeated cycles of migration and return.

These findings suggested that the primary barrier to migration was not the initial cost of moving, but the inability to smooth income during periods of unemployment while searching for stable work. This insight motivated the evaluation of a conditional unemployment insurance program designed to reduce risk, support job search, and facilitate more sustained urban migration.

Study Design

The study was implemented as a randomized controlled trial in Siaya County, Kenya, targeting young men aged 18–30. A total of 111 villages were randomly assigned to one of three groups: an unemployment benefits treatment, an unconditional cash transfer group, or a control group. From these villages, approximately 1,300 eligible participants were selected.

Individuals in the primary treatment group were offered access to a conditional unemployment insurance program, which provided approximately $4 USD per day for up to 15 days if they migrated to Nairobi and were unemployed. This support was designed to cover basic living costs during job search periods without fully replacing wages, thereby limiting potential disincentives to work. Payments were conditional on in-person collection during working hours and accompanied by brief surveys to verify unemployment status.

A secondary treatment group received an unconditional cash transfer of equivalent expected value, delivered in the home village. This comparison allowed the study to isolate the effect of income smoothing in the urban environment from the effect of increased liquidity alone.

Participants were surveyed at baseline and followed over time through high-frequency phone surveys and endline data collection. Outcomes of interest included migration decisions, employment trajectories, income, well-being, and risk preferences.

Results and Policy Lessons

Access to unemployment insurance substantially increased migration to Nairobi. Over the study period, migration rates in the treatment group more than tripled relative to the control group, rising from a baseline of approximately 4.7% to 15.8%. This represented an increase of over 10 percentage points and indicated that reducing income risk played a central role in migration decisions.

Importantly, these effects persisted beyond the program period. Even after benefits ended, migrants in the treatment group were significantly more likely to remain in Nairobi, which suggests that the program facilitated more durable transitions rather than temporary moves. In contrast, the unconditional cash transfer produced a smaller and less persistent effect, primarily accelerating migration among individuals who were already inclined to move rather than inducing new migrants.

Additional findings highlighted the mechanism behind these effects. The unemployment insurance program attracted individuals who were more risk-averse and indicated that insurance reduced perceived uncertainty and enabled migration among those previously deterred by risk. Migrants also experienced improvements in housing quality, though these gains were accompanied by increases in reported stress, underscoring the complex welfare implications of urban relocation.

Overall, the results demonstrated that policies addressing income volatility, rather than only upfront costs, can play a critical role in enabling efficient rural-to-urban migration. By reducing risk during the job search process, unemployment insurance can help workers transition into more productive urban labor markets and remain there long enough to realize long-term gains.