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External Shocks, Household Consumption and Fertility in Indonesia

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  • Jungho Kim

    ()

  • Alexia Prskawetz

    ()

Abstract

This paper examines the impact of idiosyncratic income shocks on household consumption, educational expenditure and fertility in Indonesia, and assesses whether the investment in human capital of children and fertility are used to smooth household consumption. Using six different kinds of self-reported economic hardships, our findings indicate that coping mechanisms are rather efficient for Indonesian households that perceive an economic hardship. Only in case of unemployment we find a significant decrease in consumption spending and educational expenditure while fertility increases. Theses results indicate that households that perceive an unemployment shock use children as a means for smoothing consumption. Regarding the death of a household member or natural disaster we find that consumption even increases. These results are consistent with the argument that coping mechanisms even over-compensate the actual consumption loss due to an economic hardship. One important lesson from our findings is that different types of income shock may lead to different economic and demographic behavioral adjustments and therefore require specific targeted social insurance programs.

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Bibliographic Info

Article provided by Springer in its journal Population Research and Policy Review.

Volume (Year): 29 (2010)
Issue (Month): 4 (August)
Pages: 503-526

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Handle: RePEc:kap:poprpr:v:29:y:2010:i:4:p:503-526

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Web page: http://www.springerlink.com/link.asp?id=102983

Related research

Keywords: Consumption; Economic shocks; Social insurance; Fertility; Indonesia;

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  1. Cameron, L. & Worswick, C., 1998. "Education Expenditure Responses to Crop Loss in Indonesia: A Gender Bias," Department of Economics - Working Papers Series 636, The University of Melbourne.
  2. Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
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  7. Rosenzweig, Mark R. & Pitt, Mark M., 1984. "Agricultural Prices, Food Consumption and the Health and Productivity of Farmers," Bulletins 7471, University of Minnesota, Economic Development Center.
  8. Skoufias, Emmanuel, 2003. "Economic Crises and Natural Disasters: Coping Strategies and Policy Implications," World Development, Elsevier, vol. 31(7), pages 1087-1102, July.
  9. Conley, Timothy G. & Galenson, David W., 1998. "Nativity and Wealth in Mid-Nineteenth-Century Cities," The Journal of Economic History, Cambridge University Press, vol. 58(02), pages 468-493, June.
  10. Nikhil Roy & Andrew D. Foster, 1996. "The Dynamics of Education and Fertility: Evidence from a Family Planning Experiment"," Home Pages _073, University of Pennsylvania.
  11. Takatoshi Ito & Andrew K. Rose, 2007. "Fiscal Policy and Management in East Asia, NBER-EASE, Volume 16," NBER Books, National Bureau of Economic Research, Inc, number ito_07-1, July.
  12. Duryea, Suzanne & Lam, David & Levison, Deborah, 2007. "Effects of economic shocks on children's employment and schooling in Brazil," Journal of Development Economics, Elsevier, vol. 84(1), pages 188-214, September.
  13. repec:ese:iserwp:2005-13 is not listed on IDEAS
  14. Arnstein Aassve & Henriette Engelhardt & Francesca Francavilla & Abbi Kedir & Jungho Kim & Fabrizia Mealli & Letizia Mencarini & Stephen Pudney & Alexia Prskawetz, 2005. "Poverty and Fertility in Less Developed Countries: A Comparative Analysis," Discussion Papers in Economics 05/28, Department of Economics, University of Leicester.
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