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Labor Supply Responses to Adverse Shocks under Credit Constraints: Evidence from Bukidnon, Philippines

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  • Hazel Jean Malapit
  • Jade Eric Redoblado
  • Deanna Margarett Cabungcal-Dolor
  • Jasmin Suministrado
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    Abstract

    The ability of households to insure consumption from adverse shocks is an important aspect of vulnerability to poverty. How is consumption insurance achieved in a low-income setting where formal credit and insurance markets have been observed to be imperfect or missing? Using 2003 data from the Philippine province of Bukidnon, we investigate how labor supply is used to buffer transitory income shocks, in light of credit constraints. We find that the most vulnerable households are those with little education and with few or no able-bodied male members. Appropriate policy responses include counter-cyclical workfare programs targeted to households with high female-to-male ratios, households with high dependency ratios, and households with little or no education, as well as the provision of universal education and health care. These programs are likely to be effective in strengthening the labor endowments of households and improving their ability to cope with adverse shocks in the future.

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    Bibliographic Info

    Paper provided by PEP-PMMA in its series Working Papers PMMA with number 2006-15.

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    Date of creation: 2006
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    Handle: RePEc:lvl:pmmacr:2006-15

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    Keywords: Labor supply; credit constraints; consumption smoothing; coping strategies; idiosyncratic shocks; Philippines;

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