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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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