IDEAS home Printed from https://ideas.repec.org/p/ags/yaleeg/28497.html
   My bibliography  Save this paper

Consumption Smoothing? Livestock, Insurance and Drought in Rural Burkina Faso

Author

Listed:
  • Kazianga, Harounan
  • Udry, Christopher R.

Abstract

This paper explores the extent of consumption smoothing between 1981 and 1985 in rural Burkina Faso. In particular, we examine the extent to which livestock, grain storage and interhousehold transfers are used to smooth consumption against income risk. The survey coincided with a period of severe drought, so that the results provide direct evidence on the effectiveness of these various insurance mechanisms when they are the most needed. We find evidence of little consumption smoothing. In particular, there is almost no risk sharing, and households rely almost exclusively on self-insurance in the form of adjustments to grain stocks to smooth out consumption. The outcome, however is far from complete smoothing. Hence the main risk-coping strategies, which are hypothesized in the literature (risk sharing and buffer stock), were not effective during the survey period.

Suggested Citation

  • Kazianga, Harounan & Udry, Christopher R., 2004. "Consumption Smoothing? Livestock, Insurance and Drought in Rural Burkina Faso," Center Discussion Papers 28497, Yale University, Economic Growth Center.
  • Handle: RePEc:ags:yaleeg:28497
    as

    Download full text from publisher

    File URL: http://ageconsearch.umn.edu/record/28497/files/dp040898.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hans Hoogeveen, 2002. "Evidence on Informal Insurance in Rural Zimabwe," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 11(2), pages 249-278, June.
    2. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
    3. Christopher D. Carroll, 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 1-55.
    4. Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, vol. 55(6), pages 1249-1273, November.
    5. Deaton, Angus, 1992. " Household Saving in LDCs: Credit Markets, Insurance and Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 253-273.
    6. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-694, July.
    7. Blundell, Richard & Magnac, Thierry & Meghir, Costas, 1997. "Savings and Labor-Market Transitions," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 153-164, April.
    8. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
    9. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
    10. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
    11. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    12. Luigi Pistaferri, 2001. "Superior Information, Income Shocks, And The Permanent Income Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 465-476, August.
    13. Kenneth I. Wolpin & Mark R. Rosenzweig, 2000. "Natural "Natural Experiments" in Economics," Journal of Economic Literature, American Economic Association, vol. 38(4), pages 827-874, December.
    14. Strauss, J. & Thomas, D., 1995. "Empirical Modeling of Household and Family Decisions," Papers 95-12, RAND - Reprint Series.
    15. Fafchamps, Marcel & Udry, Christopher & Czukas, Katherine, 1998. "Drought and saving in West Africa: are livestock a buffer stock?," Journal of Development Economics, Elsevier, vol. 55(2), pages 273-305, April.
    16. Christopher D. Carroll & Miles S. Kimball, 2001. "Liquidity Constraints and Precautionary Saving," NBER Working Papers 8496, National Bureau of Economic Research, Inc.
    17. 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 223-244, April.
    18. Hamish Low, 1999. "Self-insurance and unemployment benefit in a life-cycle model of labour supply and savings," IFS Working Papers W99/24, Institute for Fiscal Studies.
    19. Fafchamps, Marcel, 1993. "Sequential Labor Decisions under Uncertainty: An Estimable Household Model of West-African Farmers," Econometrica, Econometric Society, vol. 61(5), pages 1173-1197, September.
    20. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    21. Attanasio, Orazio P. & Szekely, Miguel, 2004. "Wage shocks and consumption variability in Mexico during the 1990s," Journal of Development Economics, Elsevier, vol. 73(1), pages 1-25, February.
    22. Martin Ravallion & Shubham Chaudhuri, 1997. "Risk and Insurance in Village India: Comment," Econometrica, Econometric Society, vol. 65(1), pages 171-184, January.
    23. Kinsey, Bill & Burger, Kees & Gunning, Jan Willem, 1998. "Coping with drought in Zimbabwe: Survey evidence on responses of rural households to risk," World Development, Elsevier, vol. 26(1), pages 89-110, January.
    24. Ersado, Lire & Alderman, Harold & Alwang, Jeffrey, 2003. "Changes in Consumption and Saving Behavior before and after Economic Shocks: Evidence from Zimbabwe," Economic Development and Cultural Change, University of Chicago Press, vol. 52(1), pages 187-215, October.
    25. 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.
    26. Strauss, John & Thomas, Duncan, 1995. "Human resources: Empirical modeling of household and family decisions," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 34, pages 1883-2023 Elsevier.
    27. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    28. Bardhan, Pranab & Udry, Christopher, 1999. "Development Microeconomics," OUP Catalogue, Oxford University Press, number 9780198773719.
    29. Strauss, John, 1986. "Does Better Nutrition Raise Farm Productivity?," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 297-320, April.
    30. Udry, Christopher, 1995. "Risk and Saving in Northern Nigeria," American Economic Review, American Economic Association, vol. 85(5), pages 1287-1300, December.
    31. James Banks & Richard Blundell & Agar Brugiavini, 2001. "Risk Pooling, Precautionary Saving and Consumption Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 757-779.
    32. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
    33. Browning, Martin & Meghir, Costas, 1991. "The Effects of Male and Female Labor Supply on Commodity Demands," Econometrica, Econometric Society, vol. 59(4), pages 925-951, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Risk and Uncertainty;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:yaleeg:28497. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/egyalus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.