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Are the poor less well-insured? Evidence on vulnerability to income risk in rural China

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  • Jalan, Jyotsna
  • Ravallion, Martin

Abstract

The authors test how well consumption is insured against income risk in a panel of sampled households in rural China. They estimate the risk insurance models by Generalized Method of Moments, treating income and household size as endogenous. Insurance exists for all wealth groups, although the hypothesis of perfect insurance is universally rejected. Those in the poorest wealth decile are the least well-insured, with 40 percent of an income shock being passed on to current consumption. By contrast, consumption by the richest third ofhouseholds is protected from almost 90 percent of an income shock. The extent of insurance in a given wealth stratum varies little between poor and nonpoor areas.

Suggested Citation

  • Jalan, Jyotsna & Ravallion, Martin, 1997. "Are the poor less well-insured? Evidence on vulnerability to income risk in rural China," Policy Research Working Paper Series 1863, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1863
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Environmental Economics&Policies; Services&Transfers to Poor; Health Economics&Finance; Fiscal&Monetary Policy; Payment Systems&Infrastructure; Environmental Economics&Policies; Economic Theory&Research; Inequality; Health Economics&Finance; Safety Nets and Transfers;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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