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Food Aid and Informal Insurance

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Author Info
Stefan Dercon (Centre for the Study of African Economies)
Pramila Krishnan (University of Cambridge)

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Abstract

Households in developing countries use a variety of informal mechanisms to cope with risk, including mutual support and risk-sharing. These mechanisms cannot avoid that they remain vulnerable to shocks. Public programs in the form of food aid distribution and food-for-work programs are meant to protect vulnerable households from consumption and nutrition downturns by providing a safety net. In this paper we look into the extent to which food aid helps to smooth consumption by reducing the impact of negative shocks, taking into account informal risk-sharing arrangements. Using panel data from Ethiopia, we find that despite relatively poor targeting of the food aid, the programs contribute to better consumption outcomes, largely via intra-village risk sharing.

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Publisher Info
Paper provided by EconWPA in its series Development and Comp Systems with number 0409026.

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Length: 29 pages
Date of creation: 22 Sep 2004
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Handle: RePEc:wpa:wuwpdc:0409026

Note: Type of Document - pdf; pages: 29
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Web page: http://129.3.20.41

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Related research
Keywords: risk-sharing informal insurance safety nets food aid

Find related papers by JEL classification:
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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References listed on IDEAS
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. Stefan Dercon & Pramila Krishnan, 2000. "In Sickness and in Health: Risk Sharing within Households in Rural Ethiopia," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 688-727, August. [Downloadable!] (restricted)
  2. Besley, Timothy & Kanbur, Ravi, 1990. "The principles of targeting," Policy Research Working Paper Series 385, The World Bank. [Downloadable!]
  3. Morduch, Jonathan, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 103-14, Summer. [Downloadable!] (restricted)
    Other versions:
  4. Morduch, Jonathan, 1994. "Poverty and Vulnerability," American Economic Review, American Economic Association, vol. 84(2), pages 221-25, May. [Downloadable!] (restricted)
    Other versions:
  5. Jayne, Thomas S. & Strauss, John & Yamano, Takashi & Molla, Daniel, 2002. "Targeting of food aid in rural Ethiopia: chronic need or inertia?," Journal of Development Economics, Elsevier, vol. 68(2), pages 247-288, August. [Downloadable!] (restricted)
    Other versions:
  6. Clay, Daniel C. & Molla, Daniel & Habtewold, Debebe, 1999. "Food aid targeting in Ethiopia: A study of who needs it and who gets it," Food Policy, Elsevier, vol. 24(4), pages 391-409, August. [Downloadable!] (restricted)
  7. Hayashi, Fumio & Altonji, Joseph & Kotlikoff, Laurence, 1996. "Risk-Sharing between and within Families," Econometrica, Econometric Society, vol. 64(2), pages 261-94, March. [Downloadable!] (restricted)
  8. Dorosh, Paul & del Ninno, Carlo & Sahn, David E., 1995. "Poverty alleviation in Mozambique: a multi-market analysis of the role of food aid," Agricultural Economics, Blackwell, vol. 13(2), pages 89-99, November. [Downloadable!] (restricted)
  9. Udry, Christopher, 1995. "Risk and Saving in Northern Nigeria," American Economic Review, American Economic Association, vol. 85(5), pages 1287-1300, December. [Downloadable!] (restricted)
  10. Barrett, Christopher B., 2002. "Food security and food assistance programs," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 40, pages 2103-2190 Elsevier. [Downloadable!] (restricted)
  11. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-44, April. [Downloadable!] (restricted)
  12. Morduch, Jonathan, 1999. "Between the State and the Market: Can Informal Insurance Patch the Safety Net?," World Bank Research Observer, Oxford University Press, vol. 14(2), pages 187-207, August. [Downloadable!]
  13. Attanasio, Orazio & Rios-Rull, Jose-Victor, 2000. "Consumption smoothing in island economies: Can public insurance reduce welfare?," European Economic Review, Elsevier, vol. 44(7), pages 1225-1258, June. [Downloadable!] (restricted)
  14. Alderman, Harold & Lindert, Kathy, 1998. "The Potential and Limitations of Self-Targeted Food Subsidies," World Bank Research Observer, Oxford University Press, vol. 13(2), pages 213-29, August. [Downloadable!]
  15. Daniel C. Clay & Daniel Molla & Debebe Habtewold, 1998. "Food Aid Targeting in Ethiopia: A Study of Household Food Insecurity and Food Aid Distributions," International Development Collaborative Working Papers ET-FSRP-WP-12, Department of Agricultural Economics, Michigan State University. [Downloadable!]
  16. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-48, September. [Downloadable!] (restricted)
    Other versions:
  17. Jayne, T. S. & Strauss, John & Yamano, Takashi & Molla, Daniel, 2001. "Giving to the Poor? Targeting of Food Aid in Rural Ethiopia," World Development, Elsevier, vol. 29(5), pages 887-910, May. [Downloadable!] (restricted)
  18. Ravallion, Martin, 1991. "Reaching the Rural Poor through Public Employment: Arguments, Evidence, and Lessons from South Asia," World Bank Research Observer, Oxford University Press, vol. 6(2), pages 153-75, July.
  19. Sahn, David E & Alderman, Harold, 1996. "The Effect of Food Subsidies on Labor Supply in Sri Lanka," Economic Development and Cultural Change, University of Chicago Press, vol. 45(1), pages 125-45, October.
  20. Ligon, Ethan & Thomas, Jonathan P & Worrall, Tim, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 209-44, January.
  21. Grain Market Research Project, 1998. "Food Aid Targeting in Ethiopia: A Study of Household Food Insecurity and Food Aid Distributions," International Development Collaborative Working Papers ET-FSRP-MA-06, Department of Agricultural Economics, Michigan State University. [Downloadable!]
  22. Christopher Barrett & Daniel Clay, 2003. "How Accurate is Food-for-Work Self-Targeting in the Presence of Imperfect Factor Markets? Evidence from Ethiopia," The Journal of Development Studies, Taylor and Francis Journals, vol. 39(5), pages 152-180, June. [Downloadable!] (restricted)
  23. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May. [Downloadable!] (restricted)
    Other versions:
  24. Athanasios, Athanasenas & Bezuneh, Mesfin & Deaton, Brady J., 1994. "Impacts of FFW on nutrition in rural Kenya," Agricultural Economics, Blackwell, vol. 11(2-3), pages 301-309, December. [Downloadable!] (restricted)
Full references

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. Takashi Yamano & Harold Alderman & Luc Christiaensen, 2003. "Child growth, shocks, and food aid in rural Ethiopia," Policy Research Working Paper Series 3128, The World Bank. [Downloadable!]
    Other versions:
  2. Philippe LeMay-Boucher, 2007. "Insurance for the Poor: The Case of Informal Insurance Groups in Benin," CERT Discussion Papers 0707, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
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