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Are the poor less well insured? Evidence on vulnerability to income risk in rural China

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  • Jalan, Jyotsna
  • Ravallion, Martin

Abstract

The authors test how well consumption is insured against income risk in a panel of sampled households in rural China. They estimate the risk insurance models by Generalized Method of Moments, treating income and household size as endogenous. Insurance exists for all wealth groups, although the hypothesis of perfect insurance is universally rejected. Those in the poorest wealth decile are the least well-insured, with 40 percent of an income shock being passed on to current consumption. By contrast, consumption by the richest third ofhouseholds is protected from almost 90 percent of an income shock. The extent of insurance in a given wealth stratum varies little between poor and nonpoor areas.

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Bibliographic Info

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

Volume (Year): 58 (1999)
Issue (Month): 1 (February)
Pages: 61-81

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Handle: RePEc:eee:deveco:v:58:y:1999:i:1:p:61-81

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  1. Roland Benabou, 1996. "Inequality and Growth," NBER Working Papers 5658, National Bureau of Economic Research, Inc.
  2. Alderman, Harold & Paxson, Christina H & DEC, 1992. "Do the poor insure? A synthesis of the literature on risk and consumption in developing countries," Policy Research Working Paper Series 1008, The World Bank.
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  4. Lipton, Michael & Ravallion, Martin, 1995. "Poverty and policy," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 41, pages 2551-2657 Elsevier.
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