Risk Pooling through Transfers in Rural Ethiopia

L. Pan

Research output: Contribution to journalArticleAcademicpeer-review

9 Citations (Scopus)

Abstract

It is often assumed that transfers received from government, nongovernment organizations (NGOs), friends, and relatives help rural households to pool risk. In this article I investigate two functions of transfers in Ethiopia: risk pooling and income redistribution. Unlike most of the literature, this article investigates not only whether but also how much risk pooling is achieved. I find evidence that transfers from government/NGOs play a role in insuring covariant income shocks and evidence that transfers from both government/NGOs and friends/relatives redistribute income. However, the contributions of these transfers to risk pooling and income redistribution are economically very limited. Moreover, transfers from friends/relatives do not play a role in risk sharing. Although transfers only play a minor role in risk pooling, households in the study villages are found to be able to insure most of their idiosyncratic income shocks and part of their covariant income shocks.
Original languageEnglish
Pages (from-to)809-835
JournalEconomic Development and Cultural Change
Volume57
Issue number4
DOIs
Publication statusPublished - 2009

Keywords

  • sharing networks
  • northern nigeria
  • village india
  • insurance
  • consumption
  • responses
  • shocks
  • income
  • markets
  • credit

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