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Risk Pooling through Transfers in Rural Ethiopia

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  • Lei Pan
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Abstract

It is often assumed that transfers received from government, nongovernment organizations (NGOs), friends, and relatives help rural households to pool risk. In this article I investigate two functions of transfers in Ethiopia: risk pooling and income redistribution. Unlike most of the literature, this article investigates not only whether but also how much risk pooling is achieved. I find evidence that transfers from government/NGOs play a role in insuring covariant income shocks and evidence that transfers from both government/NGOs and friends/relatives redistribute income. However, the contributions of these transfers to risk pooling and income redistribution are economically very limited. Moreover, transfers from friends/relatives do not play a role in risk sharing. Although transfers only play a minor role in risk pooling, households in the study villages are found to be able to insure most of their idiosyncratic income shocks and part of their covariant income shocks. (c) 2009 by The University of Chicago. All rights reserved..

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Bibliographic Info

Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 57 (2009)
Issue (Month): 4 (07)
Pages: 809-835

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Handle: RePEc:ucp:ecdecc:v:57:y:2009:i:4:p:809-835

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Cited by:
  1. Bhattamishra, Ruchira & Barrett, Christopher B., 2010. "Community-Based Risk Management Arrangements: A Review," World Development, Elsevier, vol. 38(7), pages 923-932, July.
  2. Alpaslan Akay & Peter Martinsson & Haileselassie Medhin & Stefan Trautmann, 2012. "Attitudes toward uncertainty among the poor: an experiment in rural Ethiopia," Theory and Decision, Springer, vol. 73(3), pages 453-464, September.
  3. Davies, Simon, 2007. "Remittances as insurance for idiosyncratic and covariate shocks in Malawi: The importance of distance and relationship," MPRA Paper 4463, University Library of Munich, Germany.
  4. Gabriella Berloffa & Francesca Modena, 2009. "Income Shocks, Coping Strategies, and Consumption Smoothing. An Application to Indonesian Data," Department of Economics Working Papers 0901, Department of Economics, University of Trento, Italia.

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