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On consumption insurance in poor urban areas: Evidence from Ethiopia


  • Eskander Alvi

    (Department of Economics, Western Michigan University, Kalamazoo, Michigan, USA)

  • Seife Dendir

    (Department of Economics, Radford University, Radford, Virginia, USA)


This paper tests the full insurance and related hypotheses using data from urban households in Ethiopia. Whereas consumption insurance tests have focused on rural areas of developing countries, much less is known about the urban poor who remain precariously positioned in terms of consumption insurance-owing both to weak social bonding that undermines informal arrangements and thin formal insurance and financial markets. Results from OLS and GMM estimations provide evidence to this effect and show that full insurance is strongly rejected for various income and consumption categories even at the local level. The results do suggest however that partial insurance may be taking place though only among the most vulnerable. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Eskander Alvi & Seife Dendir, 2009. "On consumption insurance in poor urban areas: Evidence from Ethiopia," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(5), pages 699-713.
  • Handle: RePEc:wly:jintdv:v:21:y:2009:i:5:p:699-713 DOI: 10.1002/jid.1505

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    References listed on IDEAS

    1. Nelson, J.A., 1993. "On Testing for Full Insurance Using Consumer Expenditures Survey Data," Papers 93-02, California Davis - Institute of Governmental Affairs.
    2. 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.
    3. Cox, Donald & Jimenez, Emmanuel, 1998. "Risk Sharing and Private Transfers: What about Urban Households?," Economic Development and Cultural Change, University of Chicago Press, vol. 46(3), pages 621-637, April.
    4. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    5. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-1198, December.
    6. Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-956, October.
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    Cited by:

    1. Beyene, Berhe Mekonnen, 2012. "The Link between International Remittances and Private Interhousehold Transfers," Memorandum 14/2012, Oslo University, Department of Economics.
    2. Nepal, Mani & Bohara, Alok K, 2015. "Consumption insurance under uncertainty: The case of Nepal during Maoist insurgency," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 5(1), pages 1-31.

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