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Risk Pooling through Transfers in Rural Ethiopia

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  • Lei Pan

    () (Vrije Universiteit Amsterdam)

Abstract

It is often assumed that transfers received from governments, nongovernment organizations (NGOs), friends and relatives help rural households to pool risk. In this paper I investigate two functions of transfers in Ethiopia: risk pooling and income redistribution. Unlike most of the literature this paper investigates not only whether but also how much risk pooling is achieved. I find evidence that transfers from governments/NGOs play a role in insuring covariant income shocks, (weak) evidence that transfers from friends/relatives insure idiosyncratic income shocks and evidence that transfers target the poor households. However, the contributions of transfers to risk pooling and income redistribution are economically very limited.

Suggested Citation

  • Lei Pan, 2007. "Risk Pooling through Transfers in Rural Ethiopia," Tinbergen Institute Discussion Papers 07-014/2, Tinbergen Institute, revised 28 Sep 2007.
  • Handle: RePEc:tin:wpaper:20070014
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    References listed on IDEAS

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    1. Marcel Fafchamps, 2003. "Rural Poverty, Risk and Development," Books, Edward Elgar Publishing, number 3127.
    2. Hanan G. Jacoby & Emmanuel Skoufias, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 311-335.
    3. 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.
    4. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    5. Stefan Dercon & Pramila Krishnan, 1998. "Changes in poverty in rural Ethiopia 1989-1995: measurement, robustness tests and decomposition," CSAE Working Paper Series 1998-07, Centre for the Study of African Economies, University of Oxford.
    6. Travis J. Lybbert & Christopher B. Barrett & Solomon Desta & D. Layne Coppock, 2004. "Stochastic wealth dynamics and risk management among a poor population," Economic Journal, Royal Economic Society, vol. 114(498), pages 750-777, October.
    7. Fafchamps, Marcel & Gubert, Flore, 2007. "The formation of risk sharing networks," Journal of Development Economics, Elsevier, vol. 83(2), pages 326-350, July.
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    Cited by:

    1. repec:eee:wdevel:v:104:y:2018:i:c:p:78-96 is not listed on IDEAS
    2. d'Errico, Marco & Pietrelli, Rebecca & Romano, Donato, 2016. "Household resilience to food insecurity: evidence from Tanzania and Uganda," 2016 Fifth AIEAA Congress, June 16-17, 2016, Bologna, Italy 242328, Italian Association of Agricultural and Applied Economics (AIEAA).
    3. Berloffa, Gabriella & Modena, Francesca, 2013. "Income shocks, coping strategies, and consumption smoothing: An application to Indonesian data," Journal of Asian Economics, Elsevier, vol. 24(C), pages 158-171.
    4. Baird, Timothy D. & Gray, Clark L., 2014. "Livelihood Diversification and Shifting Social Networks of Exchange: A Social Network Transition?," World Development, Elsevier, vol. 60(C), pages 14-30.
    5. Alpaslan Akay & Peter Martinsson & Haileselassie Medhin & Stefan Trautmann, 2012. "Attitudes toward uncertainty among the poor: an experiment in rural Ethiopia," Theory and Decision, Springer, vol. 73(3), pages 453-464, September.

    More about this item

    Keywords

    Risk; Insurance; Income redistribution;

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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