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Food Aid and Informal Insurance

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  • Dercon, Stefan
  • Krishnan, Pramila

Abstract

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 to 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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Suggested Citation

  • Dercon, Stefan & Krishnan, Pramila, 2003. "Food Aid and Informal Insurance," WIDER Working Paper Series 009, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:dp2003-09
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Takashi Yamano & Harold Alderman & Luc Christiaensen, 2005. "Child Growth, Shocks, and Food Aid in Rural Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 273-288.
    2. Macours, Karen & Premand, Patrick & Vakis, Renos, 2012. "Transfers, Diversification and Household Risk Strategies: Experimental evidence with lessons for climate change adaptation," CEPR Discussion Papers 8940, C.E.P.R. Discussion Papers.
    3. Guizar-Mateos, Isai & Dadzie, Nicholas, 2014. "Financial Services and Divisible Technology Dis-adoption among Farm Households: Theory and Empirical Application Using Data from Ethiopia," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 171765, Agricultural and Applied Economics Association.
    4. Barrett, Christopher B. & McPeak, John G., 2003. "Poverty Traps and Safety Nets," Working Papers 127808, Cornell University, Department of Applied Economics and Management.
    5. Andersson, Camilla & Mekonnen, Alemu & Stage, Jesper, 2011. "Impacts of the Productive Safety Net Program in Ethiopia on livestock and tree holdings of rural households," Journal of Development Economics, Elsevier, vol. 94(1), pages 119-126, January.
    6. Yoshito Takasaki, 2011. "How is disaster aid allocated within poor villages?," Tsukuba Economics Working Papers 2011-004, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba.
    7. Lam, Lai Ming & Paul, Saumik, 2013. "Displacement and Erosion of Informal Risk-Sharing: Evidence from Nepal," World Development, Elsevier, vol. 43(C), pages 42-55.
    8. Lentz, Erin C. & Barrett, Christopher B., 2004. "Food Aid Targeting, Shocks And Private Transfers Among East African Pastoralists," 2004 Annual meeting, August 1-4, Denver, CO 20247, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. del Ninno, Carlo & Dorosh, Paul A. & Subbarao, Kalanidhi, 2007. "Food aid, domestic policy and food security: Contrasting experiences from South Asia and sub-Saharan Africa," Food Policy, Elsevier, vol. 32(4), pages 413-435, August.
    10. Philippe LeMay-Boucher, 2007. "Insurance for the Poor: The Case of Informal Insurance Groups in Benin," CERT Discussion Papers 0707, Centre for Economic Reform and Transformation, Heriot Watt University.
    11. Gelan, Ayele Ulfata, 2007. "Does food aid have disincentive effects on local production? A general equilibrium perspective on food aid in Ethiopia," Food Policy, Elsevier, vol. 32(4), pages 436-458, August.
    12. Alix-Garcia, Jennifer & Bartlett, Anne & Saah, David, 2012. "Displaced Populations, Humanitarian Assistance and Hosts: A Framework for Analyzing Impacts on Semi-urban Households," World Development, Elsevier, vol. 40(2), pages 373-386.
    13. Alem, Yonas & Broussard, Nzinga H., 2013. "Do Safety Nets Promote Technology Adoption? Panel data evidence from rural Ethiopia," Working Papers in Economics 556, University of Gothenburg, Department of Economics.
    14. Alderman, Harold & Yemtsov, Ruslan, 2012. "Productive role of safety nets : background paper for the World Bank 2012-2022 social protection and labor strategy," Social Protection and Labor Policy and Technical Notes 67609, The World Bank.
    15. Bet Caeyers & Stefan Dercon, 2012. "Political Connections and Social Networks in Targeted Transfer Programs: Evidence from Rural Ethiopia," Economic Development and Cultural Change, University of Chicago Press, vol. 60(4), pages 639 - 675.

    More about this item

    Keywords

    risk-sharing; informal insurance; safety nets; food aid;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • 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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