Insurance Against Poverty
OUP Oxford, 2005 - Business & Economics - 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 social security, 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 withrisk.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. The micro-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 onproviding a comprehensive menu of ex-ante and post-crisis protection mechanisms, including new forms of 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-basedsupport networks; rather they should be used to build on the strengths of these networks to ensure broader 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 topical field of insurance and risk.
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accumulation adult adverse selection agents aggregate agricultural assets Aurepalle autarky borrowers cent coefficients constraints Consumption Smoothing control villages coping correlation costs Côte d'Ivoire covariance crop crowding-out Dercon and Krishnan developing countries Development Economics distribution dummies dynamics estimated Ethiopia evidence example expenditure farmers 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 Journal of Development labour land livestock loans marginal utility measure microcredit microfinance monitoring moral hazard Morduch mutual insurance negative networks non-poor panel data participation participation constraint period Platteau poverty line poverty trap price shocks private transfers problems production Quartile rainfall Ravallion received regression relative risk aversion risk compensation risk-sharing rural sample savings social protection spouse strategies Studies Table targeting treatment villages utility variables vulnerability wealth welfare World Bank