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External Shocks, Household Consumption and Fertility in Indonesia


  • Jungho Kim


  • Alexia Prskawetz



This paper examines the impact of idiosyncratic income shocks on household consumption, educational expenditure and fertility in Indonesia, and assesses whether the investment in human capital of children and fertility are used to smooth household consumption. Using six different kinds of self-reported economic hardships, our findings indicate that coping mechanisms are rather efficient for Indonesian households that perceive an economic hardship. Only in case of unemployment we find a significant decrease in consumption spending and educational expenditure while fertility increases. Theses results indicate that households that perceive an unemployment shock use children as a means for smoothing consumption. Regarding the death of a household member or natural disaster we find that consumption even increases. These results are consistent with the argument that coping mechanisms even over-compensate the actual consumption loss due to an economic hardship. One important lesson from our findings is that different types of income shock may lead to different economic and demographic behavioral adjustments and therefore require specific targeted social insurance programs.
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Suggested Citation

  • Jungho Kim & Alexia Prskawetz, 2010. "External Shocks, Household Consumption and Fertility in Indonesia," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 29(4), pages 503-526, August.
  • Handle: RePEc:kap:poprpr:v:29:y:2010:i:4:p:503-526
    DOI: 10.1007/s11113-009-9157-2

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    References listed on IDEAS

    1. Raj Chetty & Adam Looney, 2007. "Income Risk and the Benefits of Social Insurance: Evidence from Indonesia and the United States," NBER Chapters,in: Fiscal Policy and Management in East Asia, NBER-EASE, Volume 16, pages 99-121 National Bureau of Economic Research, Inc.
    2. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    3. Michael Grimm, 2006. "Mortality and survivor's consumption," Working Papers DT/2006/13, DIAL (Développement, Institutions et Mondialisation).
    4. Skoufias, Emmanuel, 2003. "Economic Crises and Natural Disasters: Coping Strategies and Policy Implications," World Development, Elsevier, vol. 31(7), pages 1087-1102, July.
    5. Rosenzweig, Mark R. & Pitt, Mark M., 1984. "Agricultural Prices, Food Consumption and the Health and Productivity of Farmers," Bulletins 7471, University of Minnesota, Economic Development Center.
    6. Conley, Timothy G. & Galenson, David W., 1998. "Nativity and Wealth in Mid-Nineteenth-Century Cities," The Journal of Economic History, Cambridge University Press, vol. 58(02), pages 468-493, June.
    7. Arnstein Aassve & Henriette Engelhardt & Francesca Francavilla & Abbi Kedir & Jungho Kim & Fabrizia Mealli & Letizia Mencarini & Stephen Pudney & Alexia Prskawetz, 2005. "Poverty and Fertility in Less Developed Countries: A Comparative Analysis," Discussion Papers in Economics 05/28, Department of Economics, University of Leicester.
    8. Cameron, Lisa A & Worswick, Christopher, 2001. "Education Expenditure Responses to Crop Loss in Indonesia: A Gender Bias," Economic Development and Cultural Change, University of Chicago Press, vol. 49(2), pages 351-363, January.
    9. Nikhil Roy & Andrew D. Foster, 1996. "The Dynamics of Education and Fertility: Evidence from a Family Planning Experiment"," Home Pages _073, University of Pennsylvania.
    10. Rosenzweig, Mark R & Schultz, T Paul, 1985. "The Demand for and Supply of Births: Fertility and Its Life Cycle Consequences," American Economic Review, American Economic Association, vol. 75(5), pages 992-1015, December.
    11. Lisa A. Cameron & Christopher Worswick, 2003. "The Labor Market as a Smoothing Device: Labor Supply Responses to Crop Loss," Review of Development Economics, Wiley Blackwell, vol. 7(2), pages 327-341, May.
    12. Duryea, Suzanne & Lam, David & Levison, Deborah, 2007. "Effects of economic shocks on children's employment and schooling in Brazil," Journal of Development Economics, Elsevier, vol. 84(1), pages 188-214, September.
    13. Takatoshi Ito & Andrew K. Rose, 2007. "Fiscal Policy and Management in East Asia, NBER-EASE, Volume 16," NBER Books, National Bureau of Economic Research, Inc, number ito_07-1, January.
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    Cited by:

    1. Parlow, Anton, 2016. "Birth and Fertility during War: Afghanistan from 2007 to 2010," MPRA Paper 76366, University Library of Munich, Germany.
    2. Parlow, Anton, 2016. "Adult Health Outcomes during War: The Case of Afghanistan," MPRA Paper 76365, University Library of Munich, Germany.


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