Income Risk, Coping Strategies, and Safety Nets

Poor rural and urban households in developing countries face substantial risks, which they handle with risk-management and risk-coping strategies, including self-insurance through savings and informal insurance mechanisms. Despite these mechanisms,...

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Bibliographic Details
Main Author:	Dercon, Stefan
Format:	Journal Article
Language:	English en_US
Published:	World Bank 2013
Subjects:	AGRICULTURAL WAGE AGRICULTURE ANALYSIS OF VARIANCE ARID TROPICS ASSET HOLDINGS ASSET VULNERABILITY FRAMEWORK ASSETS BARRIERS TO ENTRY BENCHMARK CATTLE OWNERSHIP CHILD GROWTH CHILD HEALTH CHILD LABOR CHILD MORTALITY CHRONIC ILLNESS CHRONIC POVERTY CHRONICALLY POOR COMPARATIVE ADVANTAGE CONSUMPTION INSURANCE CONSUMPTION LEVELS CONSUMPTION SMOOTHING COPING STRATEGIES CREDIT MARKET CONSTRAINTS CREDIT PROGRAMS CRISES CROP DIVERSIFICATION CROP INCOME CROWDING OUT DEPOSITS DEVELOPMENT ECONOMICS DOWNSIDE RISKS DROUGHT DYNAMIC POVERTY ECONOMIC CRISIS ECONOMIC FLUCTUATIONS ECONOMIC POLICIES ECONOMIC REFORM ECONOMIC RESEARCH ECONOMIC SHOCKS ECONOMICS ECONOMICS LITERATURE ECONOMICS RESEARCH ECONOMIES OF SCALE EMPLOYMENT EQUILIBRIUM ANALYSIS ETHNIC GROUPS EXPECTED UTILITY EXTENDED FAMILIES FAMINE FARM ACTIVITIES FARM HOUSEHOLDS FARMERS FEMALE LABOR FINANCIAL CRISIS FINANCIAL MARKETS FOOD AID FOOD CONSUMPTION FOOD EXPENDITURE FOOD INSECURITY FOOD INTAKE FOOD MARKETS FOOD PRICES FOOD PROCESSING FOOD-FOR-WORK FOREIGN EXCHANGE FORMAL SAFETY NETS HOUSEHOLD CONSUMPTION HOUSEHOLD INCOME HOUSEHOLD INCOME DIVERSIFICATION HOUSEHOLD LEVEL HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLD VULNERABILITY HUMAN CAPITAL HUMAN DEVELOPMENT HUMAN RESOURCES IDIOSYNCRATIC RISK IDIOSYNCRATIC RISKS IDIOSYNCRATIC SHOCKS IMPACT OF SHOCKS IMPLICIT CONTRACTS INCIDENCE OF POVERTY INCOME INCOME FLUCTUATIONS INCOME GAP INCOME GROWTH INCOME RISK INCOME SHOCKS INCOME SMOOTHING INCOME-GENERATING ACTIVITIES INEQUALITY INFLATION INFORMAL CREDIT INFORMAL INSURANCE INFORMAL INSURANCE MECHANISMS INSURANCE MARKETS INSURANCE SCHEMES INSURANCE SYSTEMS INTEREST RATE INTEREST RATES INVENTORY LABOR FORCE LABOR FORCE PARTICIPATION LABOR MARKET LABOR SUPPLY LACK OF WATER LANDHOLDINGS LANDLESS LANDLESS HOUSEHOLDS LDCS LIQUID ASSETS LIQUIDITY MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC STABILITY MANAGERIAL ECONOMICS MARKET LIBERALIZATION MICROFINANCE MIGRATION MONITORING COSTS MUTUAL INSURANCE NEEDY HOUSEHOLDS NEGATIVE EXTERNALITIES NONFARM INCOME NUTRITION PERMANENT INCOME POLITICAL ECONOMY POOR POOR HOUSEHOLDS PORTFOLIO POVERTY ANALYSIS POVERTY DYNAMICS POVERTY ESTIMATES POVERTY GAP POVERTY LEVEL POVERTY LINE POVERTY MEASURES POVERTY REDUCTION POVERTY REDUCTION STRATEGIES PRECAUTIONARY SAVINGS PRIVATE TRANSFERS PRODUCT MARKETS PROFITABILITY PUBLIC SAFETY NETS PUBLIC TRANSFER PUBLIC TRANSFERS PURCHASING POWER RECIPROCITY RISK AVERSE RISK COPING RISK OF BANK FAILURE RISK POOLING RISK PREMIUM RISK REDUCING RISK REDUCTION RISK SHARING RISK-COPING ROSCAS RURAL RURAL AREAS RURAL COMMUNITIES RURAL CREDIT RURAL ECONOMY RURAL HOUSEHOLD RURAL HOUSEHOLDS RURAL POVERTY SAFETY SAFETY NET SAFETY NET PROGRAMS SAFETY NETS SAVINGS SAVINGS BEHAVIOR SCHOOL ENROLLMENT SELF-INSURANCE SHOCK SMOOTHING CONSUMPTION SOCIAL CAPITAL SOCIAL DEVELOPMENT SOCIAL PROTECTION SOCIAL SAFETY NETS SOCIAL SECURITY SUPPORT NETWORKS SUSU TARGETED TRANSFERS TARGETING TARGETING MECHANISMS TAXATION TONTINES TRANSACTIONS COSTS TRANSIENT ILLNESS TRANSIENT POVERTY TRANSPORT VILLAGE ECONOMIES VULNERABLE GROUPS VULNERABLE HOUSEHOLD VULNERABLE HOUSEHOLDS WAGE EARNERS WAR WEALTH WEALTH DISTRIBUTION WEATHER RISK WEATHER SHOCKS WORK PROGRAMS WORKING CAPITAL
Online Access:	http://documents.worldbank.org/curated/en/2002/09/17591806/income-risk-coping-strategies-safety-nets http://hdl.handle.net/10986/16419

Description
Summary:	Poor rural and urban households in developing countries face substantial risks, which they handle with risk-management and risk-coping strategies, including self-insurance through savings and informal insurance mechanisms. Despite these mechanisms, however, vulnerability to poverty linked to risk remains high. This article reviews the literature on poor households use of risk-management and risk-coping strategies. It identifies the constraints on their effectiveness and discusses policy options. It shows that risk and lumpiness limit the opportunities to use assets as insurance, that entry constraints limit the usefulness of income diversification, and that informal risk-sharing provides only limited protection, leaving some of the poor exposed to very severe negative shocks. Public safety nets are likely to be beneficial, but their impact is sometimes limited, and they may have negative externalities on households that are not covered. Collecting more information on households vulnerability to poverty through both quantitative and qualitative methods can help inform policy.

Income Risk, Coping Strategies, and Safety Nets

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