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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)

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    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.

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    File URL: http://hdl.handle.net/10.1002/jid.1505
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    Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

    Volume (Year): 21 (2009)
    Issue (Month): 5 ()
    Pages: 699-713

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    Handle: RePEc:wly:jintdv:v:21:y:2009:i:5:p:699-713
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    1. 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 621-37, April.
    2. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1989. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
    3. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May.
    4. Nelson, J.A., 1993. "On Testing for Full Insurance Using Consumer Expenditures Survey Data," Papers 93-02, California Davis - Institute of Governmental Affairs.
    5. Jalan, Jyotsna & Ravallion, Martin, 1997. "Are the poor less well-insured? Evidence on vulnerability to income risk in rural China," Policy Research Working Paper Series 1863, The World Bank.
    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 928-56, October.
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