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

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Author Info
Jalan, Jyotsna
Ravallion, Martin

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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 of households 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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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1863.

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Date of creation: 31 Dec 1997
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Handle: RePEc:wbk:wbrwps:1863

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Keywords: Environmental Economics&Policies Services&Transfers to Poor Health Economics&Finance Fiscal&Monetary Policy Payment Systems&Infrastructure Environmental Economics&Policies Economic Theory&Research Inequality Health Economics&Finance Safety Nets and Transfers

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!]
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  2. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February. [Downloadable!] (restricted)
  3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  4. Rosenzweig, Mark R & Binswanger, Hans P, 1993. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Economic Journal, Royal Economic Society, vol. 103(416), pages 56-78, January. [Downloadable!] (restricted)
  5. Lanjouw, Peter & Ravallion, Martin, 1995. "Poverty and Household Size," Economic Journal, Royal Economic Society, vol. 105(433), pages 1415-34, November. [Downloadable!] (restricted)
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  6. Martin Ravallion & Shubham Chaudhuri, 1997. "Risk and Insurance in Village India: Comment," Econometrica, Econometric Society, vol. 65(1), pages 171-184, January.
  7. Fafchamps, Marcel, 1992. "Solidarity Networks in Preindustrial Societies: Rational Peasants with a Moral Economy," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 147-74, October.
  8. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-76, October. [Downloadable!] (restricted)
  9. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May. [Downloadable!] (restricted)
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  10. Chen, Shaohua & Ravallion, Martin, 1996. "Data in transition: Assessing rural living standards in Southern China," China Economic Review, Elsevier, vol. 7(1), pages 23-56. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ari A. Perdana, 2005. "Risk management for the poor and vulnerable," CSIS Economics Working Paper Series WPE093, Centre for Strategic and International Studies, Jakarta, Indonesia. [Downloadable!]
    Other versions:
  2. Hadi Soesastro, 2003. "Economic Recovery and Reform in Indonesia," Macroeconomics Working Papers 74, East Asian Bureau of Economic Research. [Downloadable!]
  3. Jalan, Jyotsna & Ravallion, Martin, 1998. "Behavioral responses to risk in rural China," Policy Research Working Paper Series 1978, The World Bank. [Downloadable!]
    Other versions:
  4. Sarris, Alexander, 2002. "The demand for commodity insurance by developing country agricultural producers - theory and an application to cocoa in Ghana," Policy Research Working Paper Series 2887, The World Bank. [Downloadable!]
  5. Shafiah Fifi Muhibat, 2004. "Third World States in the Midst of the Cold War: A Study of ASEAN’s Decision to Establish the Zone of Peace, Freedom and Neutrality (ZOPFAN) Proposal, 1971-1972," Governance Working Papers 67, East Asian Bureau of Economic Research. [Downloadable!]
  6. Alex Arifianto, 2004. "Social Security Reform in Indonesia: An Analysis of the National Social Security Bill (RUU Jamsosnas)," Governance Working Papers 79, East Asian Bureau of Economic Research. [Downloadable!]
  7. John Giles, 2000. "Is Life More Risky in the Open? Household Risk-Coping and the Opening of China's Labor Markets," William Davidson Institute Working Papers Series 314, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  8. Marek Hudon & Bernard Lietaer, 2006. "“Natural Savings”: A New Microsavings Product for Inflationary Environments. How to Save Forests with Savings for and by the Poor?," Working Papers CEB 06-014.RS, Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB). [Downloadable!]
  9. Markus Goldstein & Elisabeth Sadoulet & Alain de Janvry, 2002. "Is a Friend in Need a Friend Indeed? Inclusion and Exclusion in Mutual Insurance Networks in Southern Ghana," STICERD - Development Economics Papers 32, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
    Other versions:
  10. Lei Pan, 2007. "Risk Pooling through Transfers in Rural Ethiopia," Tinbergen Institute Discussion Papers 07-014/2, Tinbergen Institute, revised 28 Sep 2007. [Downloadable!]
  11. McCulloch, Neil, 2003. "The impact of structural reforms on poverty : a simple methodology with extensions," Policy Research Working Paper Series 3124, The World Bank. [Downloadable!]
  12. Raj Chetty & Adam Looney, 2005. "Consumption Smoothing and the Welfare Consequences of Social Insurance in Developing Economies," NBER Working Papers 11709, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Ersado, Lire, 2006. "Rural vulnerability in Serbia," Policy Research Working Paper Series 4010, The World Bank. [Downloadable!]
  14. Kathleen Beegle & Rajeev Dehejia & Roberta Gatti, 2003. "Child Labor, Crop Shocks, and Credit Constraints," NBER Working Papers 10088, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Wagstaff, Adam, 2005. "The economic consequences of health shocks," Policy Research Working Paper Series 3644, The World Bank. [Downloadable!]
  16. Asep Suryahadi & Sudarno Sumarto, 2001. "The Chronic Poor, the Transient Poor, and the Vulnerable in Indonesia Before and After the Crisis," Development Economics Working Papers 113, East Asian Bureau of Economic Research. [Downloadable!]
  17. Philip H. Brown, 2003. "Dowry and Intrahousehold Bargaining: Evidence from China," William Davidson Institute Working Papers Series 2003-608, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  18. Jin, Songqing & Deininger, Klaus, 2007. "Land rental markets in the process of rural structural trans formation : productivity and equity impacts in China," Policy Research Working Paper Series 4454, The World Bank. [Downloadable!]
  19. Wenefrida Widyanti & Sudarno Sumarto & Asep Suryahadi, 2001. "Short-term Poverty Dynamics - Evidence from Rural Indonesia," Development Economics Working Papers 126, East Asian Bureau of Economic Research. [Downloadable!]
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