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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, February.
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    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.
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    11. Stefan Dercon & John Hoddinott & Tassew Woldehanna, 2005. "Shocks and Consumption in 15 Ethiopian Villages, 1999--2004," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 14(4), pages 559-585, December.
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    Cited by:

    1. Marco d’Errico & Donato Romano & Rebecca Pietrelli, 2018. "Household resilience to food insecurity: evidence from Tanzania and Uganda," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 10(4), pages 1033-1054, August.
    2. 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.
    3. 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.
    4. Thomas Pave Sohnesen, 2020. "Two Sides to Same Drought: Measurement and Impact of Ethiopia’s 2015 Historical Drought," Economics of Disasters and Climate Change, Springer, vol. 4(1), pages 83-101, April.
    5. d'Errico, Marco & Di Giuseppe, Stefania, 2018. "Resilience mobility in Uganda: A dynamic analysis," World Development, Elsevier, vol. 104(C), pages 78-96.
    6. Hotte, Rozenn & Marazyan, Karine, 2020. "Demand for insurance and within-kin-group marriages: Evidence from a West-African country," Journal of Development Economics, Elsevier, vol. 146(C).
    7. 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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