I document differences in labor income risk across rural and urban households in China and South Africa. Rural households experience large but more transitory shocks, while urban house-holds experience smaller but more persistent income shocks. I combine these estimates with consumption level data to discipline an incomplete market model with endogenous forward-looking migration and informal insurance. Differences in the income process are important to understand both the low passthrough of income shocks to consumption commonly measured in rural environments, and equilibrium selection into migration, which together shape differences in volatility and mean income of rural vs. urban households. I use the model to quantify the impact of differences in income risk and insurance on rural-urban wage gaps, migration, and aggregate productivity.