Vulnerability and Responses to Risk in Rural India
AbstractUsing Vulnerability as Expected Utility (VEU) analysis that permits the decomposition of household vulnerability into its components on a unique data set this paper demonstrates that in rural India household vulnerability is most explained by poverty and idiosyncratic components. So far as risk coping strategies go households rely heavily on informal instruments such as their own saving, transfers or capital depletion. However, they also try to cope with covariate risks by participating in government programmes. Further, household consumption is highly covariate with income. This implies that existing informal insurance instruments are not sufficient to protect household consumption against income shocks. Government sponsored coping strategies reduce the idiosyncratic and risk component of vulnerability. Hence, an important policy implication of our analysis is that the government should provide readily accessible and well targeted public safety nets. The existing informal strategy is not very effective as a consumption insurance mechanism. Although the government coping programme is found to reduce vulnerability access to such programmes is constrained. Expansion of government sponsored coping programmes is likely to protect households effectively from negative shocks.
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Bibliographic InfoPaper provided by The Australian National University, Australia South Asia Research Centre in its series ASARC Working Papers with number 2012-05.
Date of creation: 2012
Date of revision:
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More information through EDIRC
Vulnerability; Poverty; Covariate and Idiosyncratic shocks; REDS data; India;
Other versions of this item:
- Raghbendra Jha & Woojin Kang & Hari K. Nagarajan & Kailash C. Pradhan, 2013. "Vulnerability and Responses to Risks in Rural India," ASARC Working Papers 2013-12, The Australian National University, Australia South Asia Research Centre.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-07-08 (Agricultural Economics)
- NEP-ALL-2012-07-08 (All new papers)
- NEP-DEV-2012-07-08 (Development)
- NEP-IAS-2012-07-08 (Insurance Economics)
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