Insurance against poverty
Oxford University Press, Jan 27, 2005 - Social Science - 465 pages
Poor people in developing countries are often affected by droughts, floods, illness, crop failure, job loss, and economic downturns. Much of their energy goes into coping with these shocks and into day-to-day survival. While insurance and credit markets, combined with widespread socialsecurity, provide an important cushion against poverty in rich countries, the need for immediate survival may lock the poor into persistent poverty in developing countries.The poor in developing countries do have informal mechanisms to cope with risk and misfortune. These are based on income diversification, risk avoidance, self-insurance by saving together with family, and community-based mutual assistance. Nevertheless, the scope of these mechanisms remains limited.Repeated individual-specific shocks such as illness or pests, or covariate risks associated with drought, flood, or recession, undermine the ability of individuals and their families to cope with risk.We now know much more about vulnerability to risk and how poor people cope. Even more importantly, we have learned much about the large long-term consequences of these risks, which condemns many to persistent poverty and excludes them from economic growth. But there is much that can be done. Themicro-level studies that underpin this book offer new insights on how effective public action could be more effective in protecting the vulnerable against persistent poverty. Policy should focus on providing a comprehensive menu of ex-ante and post-crisis protection mechanisms, including new formsof insurance, savings, safety nets, and the means to strengthen the poor's asset base. Local communities have a big role to play: public funds should not be used to replace indigenous community-based support networks; rather they should be used to build on the strengths of these networks to ensurebroader and more effective protection.With numerous thematic chapters and case studies of both best practice and of failure, from a mix of low-income and middle-income countries across the developing world, this book evaluates alternatives in widening insurance and protection provision, and makes an important contribution to the topicalfield of insurance and risk.
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Testing Theories of RiskSharing
The Two Poverties
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Insurance Against Poverty
Stefan Dercon,World Institute for Development Economics Research
Limited preview - 2005
accumulation adult adverse selection agents aggregate agricultural assets beneficiaries borrowers cash-in-hand cent changes coefficients constraints Consumption Smoothing control villages correlation costs Cote d'lvoire covariate crop crowding-out developing countries distribution dummies dynamics errors estimated Ethiopia evidence example expenditure farmers financial institution fixed effects food aid food-for-work function growth household item ICRISAT idiosyncratic shocks impact incentives income shocks increase individual inequality informal insurance insurance contract intermediary investment labour land livestock loans measure microcredit microfinance monitoring moral hazard Morduch mutual insurance negative networks non-poor observed ordered logit panel data participation participation constraint period Platteau poor households poverty line price shocks private transfers problems production Quartile rainfall Ravallion received regression relative risk risk aversion risk compensation risk-sharing rural sample savings side-contracts spouse strategies Studies Table targeting Treatment villages utility variables vulnerability wealth welfare World Bank