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Risk Pooling between Households and Risk-Coping Measures in Developing Countries: Evidence from Rural Bangladesh


  • Park, Cheolsung


Using data from rural Bangladesh, I test whether income risks are pooled among villagers, between neighboring households, and between related households living in different villages. I find evidence that risks to food consumption are pooled between neighboring households and between related households but not among villagers. As for nonfood consumption, I find little evidence of risk pooling except between unrelated neighboring households. I also find that, while households belonging to a neighborhood network do not take any special measures during an economic hardship, those not belonging to any such network try to smooth consumption by selling off livestock and other assets and by getting interest-free loans. Negative income shocks are found to have little effect on labor supply or private transfers.

Suggested Citation

  • Park, Cheolsung, 2006. "Risk Pooling between Households and Risk-Coping Measures in Developing Countries: Evidence from Rural Bangladesh," Economic Development and Cultural Change, University of Chicago Press, vol. 54(2), pages 423-457, January.
  • Handle: RePEc:ucp:ecdecc:y:2006:v:54:i:2:p:423-57

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    References listed on IDEAS

    1. Jalan, Jyotsna & Ravallion, Martin, 1999. "Are the poor less well insured? Evidence on vulnerability to income risk in rural China," Journal of Development Economics, Elsevier, vol. 58(1), pages 61-81, February.
    2. Grimard, Franque, 1997. "Household consumption smoothing through ethnic ties: evidence from Cote d'Ivoire," Journal of Development Economics, Elsevier, vol. 53(2), pages 391-422, August.
    3. Firman Witoelar, 2005. "Inter-household Allocations within Extended Family: Evidence from the Indonesia Family Life Survey," Working Papers 912, Economic Growth Center, Yale University.
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    Cited by:

    1. Shoji, Masahiro, 2016. "Incentive of risk sharing and trust formation: Experimental and survey evidence from Bangladesh," MPRA Paper 71950, University Library of Munich, Germany.
    2. Dalla Pellegrina, Lucia, 2011. "Microfinance and Investment: A Comparison with Bank and Informal Lending," World Development, Elsevier, vol. 39(6), pages 882-897, June.
    3. Fikret Adaman & Oya Pinar Ardic & Didem Tuzemen, 2006. "Network Effects in Risk Sharing and Credit Market Access: Evidence from Istanbul," Working Papers 2006/17, Bogazici University, Department of Economics.
    4. Renaud Bourlès & Bruno Ventelou & Maame Esi Woode, 2012. "Child Income as an Insurance Mechanism Consequences for the Health-Education Relationship," AMSE Working Papers 1205, Aix-Marseille School of Economics, Marseille, France.
    5. Clarke, Danielle & Das, Narayan C. & de Nicola, Francesca & Hill, Ruth Vargas & Kumar, Neha & Mehta, Parendi, 2012. "The value of customized insurance for farmers in rural Bangladesh:," IFPRI discussion papers 1202, International Food Policy Research Institute (IFPRI).
    6. Firman Witoelar, 2013. "Risk Sharing within the Extended Family: Evidence from the Indonesia Family Life Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 62(1), pages 65-94.
    7. Ngigi, Marther W. & Birner, Regina, 2013. "Shocks, livestock assets and climate change adaptation in Kenya," 2013 AAAE Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161468, African Association of Agricultural Economists (AAAE).
    8. Pierre Régibeau & Katharine Rockett, 2013. "Economic analysis of resilience: A framework for local policy response based on new case studies," Journal of Innovation Economics, De Boeck Université, vol. 0(1), pages 107-147.
    9. Islam, Asadul & Maitra, Pushkar, 2012. "Health shocks and consumption smoothing in rural households: Does microcredit have a role to play?," Journal of Development Economics, Elsevier, vol. 97(2), pages 232-243.

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