Advanced Search
MyIDEAS: Login to save this article or follow this journal

Income shocks, coping strategies, and consumption smoothing: An application to Indonesian data

Contents:

Author Info

  • Berloffa, Gabriella
  • Modena, Francesca

Abstract

Using the Indonesian Family Life Survey, this study investigates whether Indonesian farmers respond differently to income shocks (crop loss) depending on the level of their asset ownership, and whether their responses are aimed at preserving consumption levels or at accumulating assets. We consider a framework in which assets contribute directly to the income generation process. In this context, the need to accumulate assets to ensure future income may lead poor farmers to behave quite differently in terms of both their responses to shocks and their consumption decisions. Our results suggest that while non-poor farmers smooth consumption relative to income, poor households use labor supply to compensate the income loss and, on average, they save half of this extra income. These results confirm the importance of savings for poor households, and highlight a crucial role for policies that support savings or, more precisely, the accumulation of productive assets.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S1049007812001108
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 24 (2013)
Issue (Month): C ()
Pages: 158-171

as in new window
Handle: RePEc:eee:asieco:v:24:y:2013:i:c:p:158-171

Contact details of provider:
Web page: http://www.elsevier.com/locate/asieco

Related research

Keywords: Shocks; Coping strategies; Consumption smoothing; Asset smoothing;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Harounan Kazianga & Christopher Udry, 2004. "Consumption Smoothing? Livestock, Insurance and Drought in Rural Burkina Faso," Working Papers, Economic Growth Center, Yale University 898, Economic Growth Center, Yale University.
  2. Pushkar Maitra, 2001. "Is consumption smooth at the cost of volatile leisure? An investigation of rural India," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 33(6), pages 727-734.
  3. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Harvard Institute of Economic Research Working Papers 1727, Harvard - Institute of Economic Research.
  4. Rosenzweig, Mark R, 1988. "Risk, Implicit Contracts and the Family in Rural Areas of Low-income Countries," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 98(393), pages 1148-70, December.
  5. Beegle, Kathleen & Dehejia, Rajeev H & Gatti, Roberta, 2005. "Child Labour, Crop Shocks and Credit Constraints," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4881, C.E.P.R. Discussion Papers.
  6. Paul Gertler & Jonathan Gruber, 1997. "Insuring Consumption Against Illness," NBER Working Papers 6035, National Bureau of Economic Research, Inc.
  7. Kochar, Anjini, 1995. "Explaining Household Vulnerability to Idiosyncratic Income Shocks," American Economic Review, American Economic Association, American Economic Association, vol. 85(2), pages 159-64, May.
  8. Dercon, Stefan, 2002. "Income Risk, Coping Strategies and Safety Nets," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  9. Marcel Fafchamps & Chris Udry & Katherine Czukas, . "Drought and Saving in West Africa: Are Livestock a Buffer Stock?," Working Papers, Stanford University, Department of Economics 97013, Stanford University, Department of Economics.
  10. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(2), pages 305-46, April.
  11. Ramsès H. ABUL NAGA & Enrico BOLZANI, 2006. "Poverty and Permanent Income: A Methodology for Cross-Section Data," Annales d'Economie et de Statistique, ENSAE, issue 81, pages 195-223.
  12. Lisa A. Cameron & Christopher Worswick, 2003. "The Labor Market as a Smoothing Device: Labor Supply Responses to Crop Loss," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 7(2), pages 327-341, 05.
  13. Jalan, Jyotsna & Ravallion, Martin, 1997. "Are the poor less well-insured? Evidence on vulnerability to income risk in rural China," Policy Research Working Paper Series 1863, The World Bank.
  14. Lei Pan, 2007. "Risk Pooling through Transfers in Rural Ethiopia," Tinbergen Institute Discussion Papers 07-014/2, Tinbergen Institute, revised 28 Sep 2007.
  15. Jacoby, Hanan G & Skoufias, Emmanuel, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(3), pages 311-35, July.
  16. Udry, Christopher, 1995. "Risk and Saving in Northern Nigeria," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1287-1300, December.
  17. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, American Economic Association, vol. 82(1), pages 15-33, March.
  18. David Newhouse, 2005. "The Persistence of Income Shocks: Evidence from Rural Indonesia," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 9(3), pages 415-433, 08.
  19. Lei Pan, 2007. "Risk Pooling through Transfers in Rural Ethiopia," Tinbergen Institute Discussion Papers 07-014/2, Tinbergen Institute, revised 28 Sep 2007.
  20. John McPeak, 2004. "Contrasting income shocks with asset shocks: livestock sales in northern Kenya," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 263-284, April.
  21. John Hoddinott, 2006. "Shocks and their consequences across and within households in Rural Zimbabwe," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 301-321.
  22. Chris Manning, 2000. "Labour Market Adjustment to Indonesia's Economic Crisis: Context, Trends and Implications," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(1), pages 105-136.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Elisabetta De Antoni, 2009. "Money and finance: the heterodox views of R. Clower, A. Leijonhufvud and H. Minsky," Department of Economics Working Papers 0908, Department of Economics, University of Trento, Italia.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:asieco:v:24:y:2013:i:c:p:158-171. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.