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Food Aid and Informal Insurance

  • Stefan Dercon
  • Pramila Krishnan

Households in developing countries use a variety of informal mechanisms to cope with risk, including mutual support and risk-sharing. These mechanisms cannot avoid that they remain vulnerable to shocks. Public programs in the form of food aid distribution and food-for-work programs are meant to protect vulnerable households from consumption and nutrition downturns by providing a safety net. In this paper we look into the extent to which food aid helps smooth consumption by reducing the impact of negative shocks, taking into account informal risk-sharing arrangements. Using panel data from Ethiopia, we find that despite relatively poor targeting of the food aid, the programs contribute to better consumption outcomes, largely via intra-village risk sharing.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/2003-01.

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Date of creation: 01 Jan 2003
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Handle: RePEc:oxf:wpaper:wps/2003-01
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  1. Attanasio, Orazio & Rios-Rull, Jose-Victor, 2000. "Consumption smoothing in island economies: Can public insurance reduce welfare?," European Economic Review, Elsevier, vol. 44(7), pages 1225-1258, June.
  2. Morduch, J., 1995. "Income Smoothing and Consumption Smoothing," Papers 512, Harvard - Institute for International Development.
  3. Jayne, Thomas S. & Strauss, John & Yamano, Takashi & Molla, Daniel, 2002. "Targeting of food aid in rural Ethiopia: chronic need or inertia?," Journal of Development Economics, Elsevier, vol. 68(2), pages 247-288, August.
  4. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, March.
  5. Dorosh, Paul & del Ninno, Carlo & Sahn, David E., 1995. "Poverty alleviation in Mozambique: a multi-market analysis of the role of food aid," Agricultural Economics, Blackwell, vol. 13(2), pages 89-99, November.
  6. Udry, Christopher, 1995. "Risk and Saving in Northern Nigeria," American Economic Review, American Economic Association, vol. 85(5), pages 1287-1300, December.
  7. Jayne, T. S. & Strauss, John & Yamano, Takashi & Molla, Daniel, 2001. "Giving to the Poor? Targeting of Food Aid in Rural Ethiopia," World Development, Elsevier, vol. 29(5), pages 887-910, May.
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