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External Shocks, Household Consumption and Fertility in Indonesia

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  • Kim Jungho
  • Alexia Prskawetz

Abstract

This paper examines the impact of idiosyncratic income shocks on household consumption, educational expenditure and fertility in Indonesia, and assesses whether the investment in human capital of children and fertility are used to smooth household consumption. Using six different kinds of self-reported economic hardships, our findings indicate that coping mechanisms are rather efficient for Indonesian households that perceive an economic hardship. Only in case of unemployment we find a significant decrease in consumption spending and educational expenditure while fertility increases. Theses results indicate that households that perceive an unemployment shock use children as a means for smoothing consumption. Regarding the death of a household member or natural disaster we find that consumption even increases. These results are consistent with the argument that coping mechanisms even over-compensate the actual consumption loss due to an economic hardship. One important lesson from our findings is that different types of income shock may lead to different economic and demographic behavioral adjustments and therefore require specific targeted social insurance programs.

Suggested Citation

  • Kim Jungho & Alexia Prskawetz, 2009. "External Shocks, Household Consumption and Fertility in Indonesia," VID Working Papers 0604, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  • Handle: RePEc:vid:wpaper:0604
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    References listed on IDEAS

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    1. Raj Chetty & Adam Looney, 2007. "Income Risk and the Benefits of Social Insurance: Evidence from Indonesia and the United States," NBER Chapters,in: Fiscal Policy and Management in East Asia, NBER-EASE, Volume 16, pages 99-121 National Bureau of Economic Research, Inc.
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    4. Skoufias, Emmanuel, 2003. "Economic Crises and Natural Disasters: Coping Strategies and Policy Implications," World Development, Elsevier, vol. 31(7), pages 1087-1102, July.
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    7. Arnstein Aassve & Henriette Engelhardt & Francesca Francavilla & Abbi Kedir & Jungho Kim & Fabrizia Mealli & Letizia Mencarini & Stephen Pudney & Alexia Prskawetz, 2005. "Poverty and Fertility in Less Developed Countries: A Comparative Analysis," Discussion Papers in Economics 05/28, Department of Economics, University of Leicester.
    8. Cameron, Lisa A & Worswick, Christopher, 2001. "Education Expenditure Responses to Crop Loss in Indonesia: A Gender Bias," Economic Development and Cultural Change, University of Chicago Press, vol. 49(2), pages 351-363, January.
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    Cited by:

    1. Parlow, Anton, 2016. "Birth and Fertility during War: Afghanistan from 2007 to 2010," MPRA Paper 76366, University Library of Munich, Germany.
    2. Parlow, Anton, 2016. "Adult Health Outcomes during War: The Case of Afghanistan," MPRA Paper 76365, University Library of Munich, Germany.

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    Keywords

    Consumption; Insurance; Fertility and Indonesia;

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