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Consumption Insurance and Vulnerability to Poverty: A Synthesis of the Evidence from Bangladesh, Ethiopia, Mali, Mexico and Russia

Abstract

This paper synthesises the results of five IFPRI studies using household panel data from Bangladesh, Ethiopia, Mali, Mexico and Russia, which examine the extent to which households are able to insure their consumption from specific economic shocks and fluctuations in their real income. The extent of consumption insurance is defined by the degree to which the growth rate of household consumption covaries with the growth rate of household income. All the case studies show that food consumption is better insured than non-food consumption from idiosyncratic shocks. Adjustments in non-food consumption appear to act as a mechanism for partially insuring ex-post food consumption from the effects of income changes. Food consumption is also more likely to be covered by informal insurance arrangements at the community level than non-food consumption. Households use a portfolio of risk-coping strategies, but may not be equally able to use them. Poorer households may be less able to use mechanisms that rely on initial wealth as collateral. In this regard, public transfer programmes may have a more redistributive effect.

Cet article synthétise les résultats de 5 études de l'IFRI qui utilisent des panels de données concernant le Bangladesh, le Mali, l'Ethiopie, le Mexique et la Russie, et s'interrogent sur la capacité des ménages à assurer leur consommation par rapport à des chocs économiques spécifiques et des fluctuations de leur revenu réel. L'importance de l'assurance-consommation est définie par le degré de la covariance entre le taux de croissance de la consommation des ménages et celui du revenu des ménages. Toutes les études de cas montrent que la consommation alimentaire est mieux couverte que la consommation non-alimentaire par rapport aux chocs idiosyncratiques. Les ajustements de la consommation non-alimentaires semblent constituer un mécanisme ex-post d'assurance partielle des effets des changements de revenus sur la consommation alimentaire. Cette derniére est mieux à même d'être couverte par des arrangements informels au niveau communautaire que la consommation non-alimentaire. Les ménages utilisent un portefeuille de stratégies de couverture de risque, mais ne sont pas tous également capables d'en tirer parti. Les plus pauvres sont peut-être moins en mesure de faire usage de mécanismes fondés sur des garanties constituées par la richesse initiale du ménage. Dans cette perspective, les programmes publics de transfert pourraient avoir un effet plus redistributif.

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Funding for the research was provided by the World Bank as part of work being undertaken by the International Food Policy Research Institute on consumption smoothing and vulnerability. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily reflect the view of the World Bank or IFPRI. The authors would like to thank Stefan Dercon, Lant Pritchett, Paul Glewwe, and Emil Tesliuc for helpful comments and suggestions. All errors and omissions are the authors’.

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Skoufias, E., Quisumbing, A. Consumption Insurance and Vulnerability to Poverty: A Synthesis of the Evidence from Bangladesh, Ethiopia, Mali, Mexico and Russia. Eur J Dev Res 17, 24–58 (2005). https://doi.org/10.1080/09578810500066498

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