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Food Aid and Informal Insurance

  • Dercon, Stefan
  • Krishnan, Pramila

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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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper DP2003/09.

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Length: 30 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:unu:wpaper:dp2003-09
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