Income Volatility, Risk-Coping Behavior and Consumption Smoothing Mechanisms in Developing Countries PDF Download
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Author: Javier Eduardo Baez
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper provides a review of the general concepts and influential findings of empirical research on risk-coping behavior and consumption smoothing arrangements in rural economies of developing countries. Low-income individuals live with high levels of risk and limited access to formal financial systems for credit and insurance. In general, the evidence indicates that their informal mechanisms to mitigate risk play an important role in partially protecting their consumption. However, these alternatives do not allow rural households to achieve an optimal allocation of risk across time and income cycles and are costly on equity grounds. In addition, risks that remain uninsured seem to have adverse long term welfare consequences. Public interventions can play a significant role in improving the income security of rural households. In doing so, it is crucial to have a good understanding of the causes and not simply the symptoms of informal risk-coping behavior and its social welfare implications.
Author: Javier Eduardo Baez
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper provides a review of the general concepts and influential findings of empirical research on risk-coping behavior and consumption smoothing arrangements in rural economies of developing countries. Low-income individuals live with high levels of risk and limited access to formal financial systems for credit and insurance. In general, the evidence indicates that their informal mechanisms to mitigate risk play an important role in partially protecting their consumption. However, these alternatives do not allow rural households to achieve an optimal allocation of risk across time and income cycles and are costly on equity grounds. In addition, risks that remain uninsured seem to have adverse long term welfare consequences. Public interventions can play a significant role in improving the income security of rural households. In doing so, it is crucial to have a good understanding of the causes and not simply the symptoms of informal risk-coping behavior and its social welfare implications.
Author: Harold Alderman
Publisher: World Bank Publications
ISBN:
Category : Consumo - Paises en desarrollo
Languages : en
Pages : 50
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Book Description
Formal tests of perfect consumption-smoothing do not provide convincing evidence that such patterns are prevalent in village economies. Nevertheless, most individuals appear to have appreciable ability to mitigate income fluctuations.
Author: Stefan Dercon
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Poor rural and urban households in developing countries face substantial risks, which they handle with risk-management and risk-coping strategies, including self-insurance through savings and informal insurance mechanisms. Despite these mechanisms, however, vulnerability to poverty linked to risk remains high. This article reviews the literature on poor households' use of risk-management and risk-coping strategies. It identifies the constraints on their effectiveness and discusses policy options. It shows that risk and lumpiness limit the opportunities to use assets as insurance, that entry constraints limit the usefulness of income diversification, and that informal risk-sharing provides only limited protection, leaving some of the poor exposed to very severe negative shocks. Public safety nets are likely to be beneficial, but their impact is sometimes limited, and they may have negative externalities on households that are not covered. Collecting more information on households' vulnerability to poverty - through both quantitative and qualitative methods - could help inform policy.
Author: Donald Makoka
Publisher: Cuvillier Verlag
ISBN: 3736927460
Category : Business & Economics
Languages : en
Pages : 226
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Book Description
Vulnerability to poverty in Malawi is highly associated with risk. Rural households face multiple shocks, most of which threaten their livelihoods and impact negatively on their welfare. This study investigates three inherently interconnected issues: vulnerability to poverty; risk management strategies; and consumption smoothing. The central research issue is on understanding the role of risk in household vulnerability and poverty. Using a two-period panel dataset of 259 households in rural Malawi, the study addresses three objectives: First, to identify the determinants of vulnerability in rural Malawi. Second, to analyze households’ coping mechanisms for different shocks and identify the determinants of these mechanisms. Third, to test for the existence of household consumption smoothing as an insurance mechanism against idiosyncratic shocks. The panel dataset used in the study was derived from the 2004 second Malawi Integrated Household Survey (IHS2) from which 259 households were sampled and followed up in 2006 with a similar questionnaire. Vulnerability was modelled as expected poverty using Christiaensen and Subbarao (2004) methodology to investigate the extent to which rural households in Malawi are vulnerable to poverty. The results show that in 2004 the sampled households had an average chance of 44 percent of falling into poverty in 2006 and around 21 percent of the non-poor in 2004 were vulnerable to poverty in 2006. Further, female-headed households appear to be more vulnerable than their male counterparts. Education, land holdings and running a non-farm income generating activity in the household reduce household vulnerability. Community infrastructures such as health clinics and access to markets have vulnerability-reducing effects. These correlates of vulnerability are extremely similar to the correlates of poverty among the sampled households. Both covariate and idiosyncratic shocks are felt more by the vulnerable households. The results further show that vulnerability among the studied households is exacerbated by low average consumption levels more than consumption volatility. The determinants of risk management strategies were analyzed using a multinomial logistic regression model. The results have shown that drought, rising food prices and illness are among the major shocks that the sampled households face, with crop diversification being used as an ex-ante risk management strategy. Ex-post coping strategies take the form of safety net programs, use of household assets and getting support from social networks, among others. The major determinants of the choice of the ex-post coping strategy among the studied households include the size of the household, the number of economically active individuals in the household, per capita landholdings, ownership of livestock, access to markets and the type of shocks that households face. Consumption smoothing was analyzed using a household asset index due to unavailability of household income data. A test for consumption smoothing was then run by considering the impact of changes in the household asset index between 2004 and 2006 on changes in consumption. The results, which are robust to measurement error in consumption expenditure, show that the studied households try to protect their consumption from shocks, with food consumption being protected more than non-food consumption. Further, poor households tend to protect their food consumption more than the non-poor households. However, the study found no evidence of perfect consumption smoothing. The major policy implications are that poverty reduction programmes would be more effective in rural Malawi if they do not only incorporate the currently poor but also the vulnerable. Since the study has shown that the main source of vulnerability appears to be low mean consumption levels among the studied households, social protection programmes that take the form of productivity-enhancing safety nets, targeting not only the poor but also the vulnerable would be effective to help them cope with shocks and increase household mean consumption levels. Programmes that help rural households to accumulate assets are also needed to help them cope with shocks. Further, promotion of small and medium scale irrigation schemes as well as the use of weather insurance, as a means of reducing the costs associated with crop failure, could be effective in dealing with the major covariate shock, drought.
Author: Emmanuel Skoufias
Publisher: World Bank Publications
ISBN: 0821396129
Category : Social Science
Languages : en
Pages : 147
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Book Description
Over the past century, the world has seen a sustained decline in the proportion of people living in poverty, but climate change could challenge further progress. The book offers country-specific studies with implications for low-income rural populations and governments risk management programs.
Author: Vandana Sipahimalani-Rao
Publisher:
ISBN:
Category : Income maintenance programs
Languages : en
Pages : 50
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Book Description
Author: Joshua Aizenman
Publisher: Cambridge University Press
ISBN: 1139446940
Category : Business & Economics
Languages : en
Pages : 615
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Book Description
Economic volatility has come into its own after being treated for decades as a secondary phenomenon in the business cycle literature. This evolution has been driven by the recognition that non-linearities, long buried by the economist's penchant for linearity, magnify the negative effects of volatility on long-run growth and inequality, especially in poor countries. This collection organizes empirical and policy results for economists and development policy practitioners into four parts: basic features, including the impact of volatility on growth and poverty; commodity price volatility; the financial sector's dual role as an absorber and amplifier of shocks; and the management and prevention of macroeconomic crises. The latter section includes a cross-country study, case studies on Argentina and Russia, and lessons from the debt default episodes of the 1980s and 1990s.
Author: Jonathan Morduch
Publisher: Princeton University Press
ISBN: 0691172986
Category : Business & Economics
Languages : en
Pages : 248
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Book Description
Drawing on the groundbreaking U.S. Financial Diaries project (http://www.usfinancialdiaries.org/), which follows the lives of 235 low- and middle-income families as they navigate through a year, the authors challenge popular assumptions about how Americans earn, spend, borrow, and save-- and they identify the true causes of distress and inequality for many working Americans.
Author: Barbara Robles
Publisher: The New Press
ISBN: 1595585621
Category : Business & Economics
Languages : en
Pages : 337
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Book Description
For every dollar owned by the average white family in the United States, the average family of color has less than a dime. Why do people of color have so little wealth? The Color of Wealth lays bare a dirty secret: for centuries, people of color have been barred by laws and by discrimination from participating in government wealth-building programs that benefit white Americans. This accessible book—published in conjunction with one of the country's leading economics education organizations—makes the case that until government policy tackles disparities in wealth, not just income, the United States will never have racial or economic justice. Written by five leading experts on the racial wealth divide who recount the asset-building histories of Native Americans, Latinos, African Americans, Asian Americans, and European Americans, this book is a uniquely comprehensive multicultural history of American wealth. With its focus on public policies—how, for example, many post–World War II GI Bill programs helped whites only—The Color of Wealth is the first book to demonstrate the decisive influence of government on Americans' net worth.
Author: Augusto de la Torre
Publisher: World Bank Publications
ISBN: 0821380818
Category : Business & Economics
Languages : en
Pages : 220
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Book Description
Governments and civil society in Latin America and the Caribbean should be well informed about the potential costs and benefits of combating climate change, their policy options over the next decades, and the global context for these policy decisions. At the same time, the global community needs to be better informed about the unique perspective of the Latin American and Caribbean region: problems the region will face, its potential contributions toward combating global warming, and how to maximize this potential while continuing to maintain growth and reduce poverty. This book, a companion volume to Low Carbon, High Growth: Latin American Responses to Climate Change, seeks to help fill both these needs.
