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Measuring how household consumption responds to income shocks is important for understanding how families cope with adverse events, for designing government insurance or other income support policies, and for understanding the transmission of business cycles and monetary policy. It is also important for evaluating the effects of fiscal or labor market reforms on consumer welfare, and for how these reforms may impact the macroeconomy given that consumption is a large share of GDP. This article reviews the economics literature of, primarily, the last 20 years, that studies the link between income shocks and consumption fluctuations at the household level. We identify three broad approaches through which researchers estimate the consumption response to income shocks: 1.) structural methods in which a fully or partially specified model helps identify the consumption response to income shocks from the data; 2.) natural experiments in which the consumption response of one group who receives an income shock is compared to another group who does not; 3.) elicitation surveys in which consumers are asked how they expect to react to various hypothetical events. None of these approaches is exclusive to a single field within economics; studies that use any of these methods are ordinarily classified, depending on their specific focus, in macroeconomics, labor economics, public finance – to name only a few fields. Our aim in this short article is to survey this increasingly busy literature and provide an accessible summary of the various estimates of the consumption response to income shocks. We concentrate on the similarities and differences between the various studies, in particular with respect to the method, data, consumption notion, and type of income shock analyzed, thus also with respect to the type of consumption response each work identifies. Our focus is on responses to shocks, i.e., unanticipated income changes; Jappelli and Pistaferri (2010) review the earlier evidence

Tradicionalmente, la literatura sobre default soberano ha pasado por alto el papel de los prestamistas multilaterales. Sin embargo, estos acreedores suponen un porcentaje significativo de los préstamos a los países emergentes y presentan una serie de características que los hacen muy diferentes, como tasas de interés más bajas o ser acreedores preferentes, entre otras. Al incluir a estos prestamistas en un modelo de equilibrio general dinámico estocástico tradicional de default soberano, puedo reproducir los altos niveles de deuda encontrados en los datos y mantener las probabilidades de default dentro de valores realistas. Además, analizo el papel de la deuda multilateral en las economías emergentes. Los préstamos multilaterales complementan la financiación privada y reducen la falta de completitud de los mercados financieros internacionales. Asimismo, la financiación multilateral actúa como un mecanismo de seguro en tiempos difíciles, lo que brinda a los países un cierto grado de suavización del consumo, en contraposición al papel de anticipación del consumo que cumple el financiamiento privado., The role of multilateral lenders in sovereign default has been traditionally overlooked by the literature. However, these creditors represent a significant share of lending to emerging markets and feature very distinct characteristics, such as lower interest rates and seniority. By including these creditors in a traditional DSGE model of sovereign default, I reproduce the high debt levels found in the data while maintaining default probabilities within realistic values. Additionally, I am able to analyze the role of multilateral debt in emerging economies. Multilateral loans complement private financing and reduce the incompleteness of international financial markets. Also, multilateral funding acts as an insurance mechanism in bad times, providing countries with some degree of consumption smoothing, opposite to the role of front-loading consumption fulfilled by private financing.

We investigate the importance of alternative motives for saving and spending patterns after retirement in the Netherlands and Australia. Using an online experimental survey, we elicit the impact on advised spending patterns and underlying saving motives of alternative retirement drawdown designs, ranging from complete flexibility in Australia to full annuitization in the Netherlands, and of major life events such as becoming frail or losing a spouse. We find that important motives for spending and saving after retirement in both countries are the desire to remain financially independent and to ensure that it is possible to enjoy life now as well as later. However, consistent with differences in real world pension settings, life span risk is more important and liquidity less important in Australia than in the Netherlands. With the exception of inter vivos transfers to a surviving spouse, the bequest motive is not important in either country. Our results suggest that an important reason for the widespread behaviour of retirees to hold on to their wealth might be the desire to hold precautionary savings for health and long-term care expenditures. We also find that individuals revise their saving motives in anticipation of major life events but are less responsive to variation in ‘experimental’ retirement drawdown arrangements, remaining aligned to the prevailing institutional arrangements in their country., SCOPUS: ar.j, info:eu-repo/semantics/published

Building on the 'partial insurance' framework of Blundell, Pistaferri and Preston (2008), I estimate households' marginal propensity to consume (MPC) out of transitory and permanent income shocks using data from the US Panel Study of Income Dynamics over 1999-2019. Following Chatterjee, Morley and Singh (2021), I use the state space representation of the model but estimate it with Bayesian methods, which provide a natural setting for estimating high dimensional models with unobserved components. I extend the model in different directions by allowing for: i) asymmetry in MPCs with respect to the sign of transitory income shocks; ii) observable and unobservable heterogeneity in MPCs; iii) robust aggregation of population statistics; and iv) selection of the main drivers of MPC variation from a rich set of covariates. The results challenge some conventional understanding of consumption smoothing behaviour. I find clear evidence of positive asymmetry - larger responses to positive transitory income shocks - for households with substantial home equity. This contrasts the existing survey evidence on 'reported preferences' and is suggestive of a behavioural interpretation. However, evidence of negative asymmetry for so called 'poor hand-to-mouth' households (who have low liquidity and low wealth) is consistent with the Kaplan-Violante two-asset model. Households with heads aged 55-64 are found to exhibit negative asymmetry, irrespective of their financial position, which is interpreted as a savings preference before retirement. Under the assumption of symmetry, I look for evidence of variation in MPCs that would accord with theoretical predictions. Distributions of MPCs along balance sheet positions show some evidence of financial frictions, but demographic characteristics account for most of the variation in MPCs. I estimate unobserved MPC heterogeneity and find that it is large for transitory MPCs, but that observed variation explains much of the heterogeneity for perman

How do business cycle fluctuations affect the ability of households to smooth consumption against idiosyncratic shocks? To answer this question, we first document that, in U.S.\ micro-data, individual consumption reacts more to income changes in booms. Standard incomplete markets models, in contrast, where individuals borrow and save to smooth consumption, predict a lower sensitivity of consumption to individual income changes during times of high output. This motivates us to consider an alternative environment where financial frictions are endogenous and arise from lack of contract enforcement, whose business cycle properties have so far not been studied. We show analytically that this model is consistent with a wide variety of cyclical patterns of insurance. In a quantitative application with unemployment risk, we show that the response of individual consumption to job losses differs strongly between times of high and low output, and identify the conditions under which it is procyclical, as in the data.

We implement a dynamic asset pricing experiment in the spirit of Lucas (1978) with storable assets and non-storable cash. In the first treatment, we impose diminishing marginal returns to cash to incentivize consumption smoothing across periods. We find that subjects use the asset to smooth consumption, although the asset trades at a discount relative to the risk-neutral fundamental price. This under-pricing is a departure from the asset price “bubbles” observed in the large experimental asset pricing literature originating with Smith et al. (1988) and can be rationalized by considering subjects' risk aversion with respect to uncertain money earnings. In a second treatment, with no induced motivation for trade à la the Smith et al. design, we find that the asset trades at a premium relative to its expected value and that shareholdings are highly concentrated. Elimination of asset price uncertainty in additional experimental treatments serves to reinforce the same observations, and suggests that speculative behaviour explains the departure of prices from fundamental value in the absence of a consumption-smoothing motive for asset trades.

This study addresses the question of how climate variability, in terms of seasonal rainfall variation, might affect food security in Malawi. It hypothesizes that seasonal rainfall variation could cause food insecurity and that the consequences of weather hazards possibly differ within the country. An additional aim of this study is therefore to map local resilience in Malawi to estimate the adaptation ability by analyzing two subsamples. The hypothesis is tested by using a two-way fixed effect regression analysis and panel data for 28 districts in Malawi covering the years 2000, 2004, 2010 and 2015. This study finds no statistically significant effect of seasonal rainfall variation on children’s health for the examined years.

We implement a dynamic asset pricing experiment in the spirit of Lucas (1978) with storable assets and non-storable cash. In the first treatment, we impose diminishing marginal returns to cash to incentivize consumption smoothing across periods. We find that subjects use the asset to smooth consumption, although the asset trades at a discount relative to the risk-neutral fundamental price. This under-pricing is a departure from the asset price “bubbles” observed in the large experimental asset pricing literature originating with Smith et al. (1988) and can be rationalized by considering subjects' risk aversion with respect to uncertain money earnings. In a second treatment, with no induced motivation for trade à la the Smith et al. design, we find that the asset trades at a premium relative to its expected value and that shareholdings are highly concentrated. Elimination of asset price uncertainty in additional experimental treatments serves to reinforce the same observations, and suggests that speculative behaviour explains the departure of prices from fundamental value in the absence of a consumption-smoothing motive for asset trades.

This study addresses the question of how climate variability, in terms of seasonal rainfall variation, might affect food security in Malawi. It hypothesizes that seasonal rainfall variation could cause food insecurity and that the consequences of weather hazards possibly differ within the country. An additional aim of this study is therefore to map local resilience in Malawi to estimate the adaptation ability by analyzing two subsamples. The hypothesis is tested by using a two-way fixed effect regression analysis and panel data for 28 districts in Malawi covering the years 2000, 2004, 2010 and 2015. This study finds no statistically significant effect of seasonal rainfall variation on children’s health for the examined years.

We investigate the importance of alternative motives for choosing a saving and consumption trajectory after retirement. Using an online experimental survey, we elicit the impact on advised spending patterns and underlying saving motives of alternative retirement drawdown designs, comprising different combinations of annuity income and wealth, and of major life events such as becoming frail or losing a spouse. We find that individuals' saving motives are revised in anticipation of major life events. They are less responsive to variation in "experimental" retirement drawdown arrangements, remaining aligned to prevailing institutional arrangements. Our results suggest that the main explanations for the widespread behaviour of retirees to hold onto their wealth are the desire to hold precautionary savings for health and other unforeseen expenses, facilitating an intra-household bequest, and making it possible to enjoy life now as well as later.

We use an event study approach to examine the economic consequences of hospital admissions for adults in two datasets: survey data from the Health and Retirement Study, and hospitalization data linked to credit reports. For non-elderly adults with health insurance, hospital admissions increase out-of-pocket medical spending, unpaid medical bills and bankruptcy, and reduce earnings, income, access to credit and consumer borrowing. The earnings decline is substantial compared to the out-of-pocket spending increase, and is minimally insured prior to age-eligibility for Social Security Retirement Income. Relative to the insured non-elderly, the uninsured non-elderly experience much larger increases in unpaid medical bills and bankruptcy rates following a hospital admission. Hospital admissions trigger less than 5 percent of all bankruptcies.

I investigate government consumption smoothing (sensitivity) under a balanced budget rule in Swedish municipalities. In general, I find Swedish municipalities to be highly consumption sensitive. Municipalities consume 87.6 % out of predicted current revenues in the time period leading up to the implementation of the balanced budget rule, and they consume 76.3 % out of predicted current revenue in the time period following the implementation. Fiscally weak municipalities are found to be more consumption sensitive than fiscally strong municipalities. Very weak municipalities have become more consumption sensitive compared with very strong municipalities since the implementation of the balanced budget rule. Thus, I find indicative evidence that both credit market constraints and formal budget rules such as balanced budget rules increase municipal consumption sensitivity.

My dissertation examines how rural Southern farmers responded to exogenous changes to household incomes during the early twentieth century. I use a range of statistical approaches: Ordinary and Two Stage Least Squares, Probit, and instrumental variable Probit. Critically, the proxy for household incomes, cotton yields, is predicted using weather fluctuations. In chapter one, I find credit constrained households have lower school attendance rates following negative income shocks. In chapter two, I find the probability of farm wage work is negatively correlated with incomes in credit constrained households. In both chapters, I use black and tenant farmers as proxies for credit constrained households. In the final chapter, I find the probability of a lynching occurring in the local community increases after household incomes fall.

This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, observed consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt aversion. Signifiant under-consumption is observed when subjects have to borrow in order to reach optimal consumption. In line with previous experiments, weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption.

My dissertation examines how rural Southern farmers responded to exogenous changes to household incomes during the early twentieth century. I use a range of statistical approaches: Ordinary and Two Stage Least Squares, Probit, and instrumental variable Probit. Critically, the proxy for household incomes, cotton yields, is predicted using weather fluctuations. In chapter one, I find credit constrained households have lower school attendance rates following negative income shocks. In chapter two, I find the probability of farm wage work is negatively correlated with incomes in credit constrained households. In both chapters, I use black and tenant farmers as proxies for credit constrained households. In the final chapter, I find the probability of a lynching occurring in the local community increases after household incomes fall.

This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, observed consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt aversion. Signifiant under-consumption is observed when subjects have to borrow in order to reach optimal consumption. In line with previous experiments, weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption.

This paper provides a simple, yet general framework to analyze the optimal time profile of benefits during the unemployment spell. We derive simple sufficient-statistics formulae capturing the insurance value and incentive costs of unemployment benefits paid at different times during the unemployment spell. Our general approach allows to revisit and evaluate in a transparent way the separate arguments for inclining or declining profiles put forward in the theoretical literature. We then estimate our sufficient statistics using administrative data on unemployment, income and wealth in Sweden. First, we exploit duration-dependent kinks in the replacement rate and find that the moral hazard cost of benefits is larger when paid earlier in the spell. Second, we find that the drop in consumption determining the insurance value of benefits is large from the start of the spell, but further increases throughout the spell. On average, savings and credit play a limited role in smoothing consumption. Our evidence therefore indicates that the recent change from a flat to a declining benefit profile in Sweden has decreased welfare. In fact, the local welfare gains push towards an increasing rather than decreasing benefit profile over the spell.

We investigate the economic consequences of sickness and death and the manner in which poor urban households in Bangladesh respond to such events. Based on panel data we assess the effects of morbidity and mortality episodes on household income, medical spending, labor supply, and consumption. We find that despite maintaining household labor supply, serious illness exerts a negative effect on income for the poor. However, the estimates do not reject consumption smoothing. The most prominent responses to finance current needs are increasing household debt through borrowing and depleting productive assets, both of which have detrimental effects on future consumption.

__Abstract__ Address delivered in shortened form at the occasion of accepting the appointment as Extraordinary Professor of Financial markets on behalf of Vereniging Trustfonds EUR at the Rotterdam School of Management, on Friday March 7, 2014. "In this address, I consider “The Social Value of Finance” from two perspectives. First, I reflect on the value for society of finance as an academic field. The recent global financial crisis has undermined the reputation of the field of finance, with the inability to foresee the crisis as one of the most prominent criticisms voiced by the media and the general public. I argue that this criticism is by and large unwarranted, primarily because the financial system has grown to be so complex that it is virtually impossible to predict the occurrence (let alone the timing and extent) of severe financial crises. However, I do believe that there are other reasons for concern about the academic field of finance. As a field, we do not get the balance right in what questions to focus on. Also, we sometimes lose ourselves in largely academic debates. One likely explanation is the “physics envy” that many economists seem to suffer from and that has led us to seek refuge in sophisticated mathematics and statistics. This development has resulted in a focus on narrow questions that can be answered quite precisely, instead of broad questions that are much harder to answer. The social value of finance as an academic field could be greater if we would be more focused on broader questions, more open minded about other fields and methodologies, and more modest about the extent of our knowledge. Second, to follow up on these aspirations, I present a new research agenda on the value for society of finance in the sense of a financial system (that is, the social value of banks and financial markets). Although the belief that financial systems fulfill

This paper studies optimal public unemployment insurance (UI) when workers have the possibility of topping-up public UI with private UI that is endogenous to public UI and subject to moral hazard. The issue is analyzed with a theoretical model in which publicly insured workers, who differ in layoff risk, hidden to the planner, are offered to top-up public UI with private UI. In the model, high risk workers top-up while low risk workers abstain from private UI. The result is lower public UI while UI with top-up is more generous compared to UI in a purely public system. Less risk pooling, however, leads to higher costs for mixed UI provision. Then, I show that the effect of public UI on assets, private UI and unemployment duration can be used as sufficient statistics to calibrate the impact on welfare from public UI in the presence of private UI. I estimate the effects using data on a Swedish union run top-up scheme. Identification is achieved using a kinked public UI benefit rule. Calibrating the model shows that workers with mixed UI experience a negative impact on welfare from increased public UI while those with only public UI seem to have about optimal UI coverage., A vast literature has investigated how unemployment insurance (UI) affects labor supply. However, the distorting effect of UI on labor supply is to a large extent determined by how well UI benefits smooth private consumption, which in turn depends on the resources available to the unemployed. To determine UI's consumption-smoothing effect, I exploit a kink in the deterministic relationship between previous earnings and unemployment benefits. The randomized assignment of benefits created by the kink allows me to identify how UI affect the use of private wealth to finance consumption during unemployment spells. Using Swedish data for 2000-2002 I find that a large share of the unemployed actually can consume at the same level as they did prior to the layoff. I also find that loans are of great importance to consumption smoothing as more than half the sample lacks buffer savings. This is further emphasized for different subpopulations. Women, couples, and older individuals hold significantly larger liquid wealth than men and young singles., Reduced form estimations of precautionary saving with respect to labor market risk have hitherto failed to consider that a decrease of say unemployment probability or an increase in unemployment insurance (UI) generosity affects saving not only by reducing the expected variance in earnings but also by raising expected earnings. This paper studies the possibility of decomposing the treatment effect of UI on asset accumulation into two parts; one part where more generous UI leads to raised expected earnings and a second part where a more generous UI reduces the expected variation in earnings. The decomposition is applied to rich Swedish register data on both financial assets and debt. UI's effect on assets is identified with a kinked policy rule in the UI scheme. First, increased UI generosity has a significant effect, both economically and statistically, on asset holdings; a one percentage point increase in UI benefits decrease net financial asset holdings by 1 percentage point. Second, decomposing the total effect UI has on asset accumulation shows that raised expected earnings increase savings while a decreased variation in earnings decrease saving. Not accounting for the effect on expected earnings on saving underestimates the impact UI has on precautionary saving by 70 percent.

This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, actual consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt-aversion. Signifiant underconsumption is observed when subjects have to borrow in order to reach optimal consumption. Only weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption.

41334, Aggregate shocks such as droughts and floods cannot be perfectly insured by risk sharing within a village. Given this inability, what type of households are more vulnerable in terms of a decline in consumption when a village is hit by such shocks and what kind of microeconomic mechanism underlies the household heterogeneity in vulnerability? These questions are investigated using two-period panel data collected in rural Pakistan in 2001 and 2004. We compare consumption response to droughts, floods, and health shocks and investigate how the response differs across different types of households. Empirical results show that the impact of droughts was negligible, younger and more landed households were less vulnerable to floods, and households with greater access to formal financial institutions were less vulnerable to idiosyncratic health shocks. The empirical pattern suggests the possibility of risk sharing among households that are heterogeneous in both risk aversion and credit access.

This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, actual consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt-aversion. Signifiant underconsumption is observed when subjects have to borrow in order to reach optimal consumption. Only weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption.

This paper studies optimal public unemployment insurance (UI) when workers have the possibility of topping-up public UI with private UI that is endogenous to public UI and subject to moral hazard. The issue is analyzed with a theoretical model in which publicly insured workers, who differ in layoff risk, hidden to the planner, are offered to top-up public UI with private UI. In the model, high risk workers top-up while low risk workers abstain from private UI. The result is lower public UI while UI with top-up is more generous compared to UI in a purely public system. Less risk pooling, however, leads to higher costs for mixed UI provision. Then, I show that the effect of public UI on assets, private UI and unemployment duration can be used as sufficient statistics to calibrate the impact on welfare from public UI in the presence of private UI. I estimate the effects using data on a Swedish union run top-up scheme. Identification is achieved using a kinked public UI benefit rule. Calibrating the model shows that workers with mixed UI experience a negative impact on welfare from increased public UI while those with only public UI seem to have about optimal UI coverage., A vast literature has investigated how unemployment insurance (UI) affects labor supply. However, the distorting effect of UI on labor supply is to a large extent determined by how well UI benefits smooth private consumption, which in turn depends on the resources available to the unemployed. To determine UI's consumption-smoothing effect, I exploit a kink in the deterministic relationship between previous earnings and unemployment benefits. The randomized assignment of benefits created by the kink allows me to identify how UI affect the use of private wealth to finance consumption during unemployment spells. Using Swedish data for 2000-2002 I find that a large share of the unemployed actually can consume at the same level as they did prior to the layoff. I also find that loans are of great importance to consumption smoothing as more than half the sample lacks buffer savings. This is further emphasized for different subpopulations. Women, couples, and older individuals hold significantly larger liquid wealth than men and young singles., Reduced form estimations of precautionary saving with respect to labor market risk have hitherto failed to consider that a decrease of say unemployment probability or an increase in unemployment insurance (UI) generosity affects saving not only by reducing the expected variance in earnings but also by raising expected earnings. This paper studies the possibility of decomposing the treatment effect of UI on asset accumulation into two parts; one part where more generous UI leads to raised expected earnings and a second part where a more generous UI reduces the expected variation in earnings. The decomposition is applied to rich Swedish register data on both financial assets and debt. UI's effect on assets is identified with a kinked policy rule in the UI scheme. First, increased UI generosity has a significant effect, both economically and statistically, on asset holdings; a one percentage point increase in UI benefits decrease net financial asset holdings by 1 percentage point. Second, decomposing the total effect UI has on asset accumulation shows that raised expected earnings increase savings while a decreased variation in earnings decrease saving. Not accounting for the effect on expected earnings on saving underestimates the impact UI has on precautionary saving by 70 percent.

This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, actual consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt-aversion. Signifiant underconsumption is observed when subjects have to borrow in order to reach optimal consumption. Only weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption.

In this paper, the concept of vulnerability of the poor’s welfare and its practical measures are scrutinised in order to derive implications for targeting poverty reduction policies toward vulnerable households. As illustration, various measures of vulnerability proposed in the literature are applied to a panel data-set collected from rural Pakistan. The empirical results show that different vulnerability rankings can be obtained depending on the choice of the measure. By utilising these measures, we can identify who and which region is more vulnerable to a particular type of risk. This kind of information is useful in targeting poverty reduction policies. Since the nature of vulnerability is diverse, it is advisable to use the whole vector of various vulnerability measures.

This article reviews the early vintage capital literature of the 1960s, and identifies the factors behind the revival of topic from the 1990s. The fundamental properties of the seminal vintage capital growth models are disentangled, and the origins of the associated controversy on the importance of embodied technical progress are evoked. The recent revival of this literature is analysed with special emphasis on the rising support for the Solowian view of investment following Gordon's 1990 fundamental work on the price of durable goods, and the emergence of a new vintage human capital literature devoted to some fundamental economic growth issues.

One of the most important potential benefits from the process of international financial integration is the opportunity it offers for diversification of macroeconomic risks internationally. In turn, the cross- border diversification of portfolio holdings is widely considered to be the major driving force behind this process. The present paper offers a complement to this literature. It identifies workers’ remittance flows to developing countries as an important channel through which the process of international risk-sharing might take place. Using a panel dataset that includes most developing countries during the period 1990-2000, this study demonstrates that countries which receive above-average levels of workers’ remittances achieve higher degrees of international risk-sharing in consumption. Moreover, this effect is not uniform across different groups of developing countries, being the strongest in transition economies.

This paper uses data from the Russian Longitudinal Monitoring Survey (RLMS) to examine the relationship between six dimensions of nutritional status and household resources paying special attention to the distinction between longer-run resources and short-run fluctuations in resources. Between 1996 and 1998, Russia experienced a dramatic decline in economic activity which was followed by an equally dramatic rise between 1998 and 2000. We exploit this fact in combination with the panel nature of RLMS to measure the effect of changes in household resources on nutritional status. Nutritional status appears to be very resilient to variation in household resources. Gross energy intake, adult body mass index (BMI), and child stature all change very little as expenditure deviates from its long-run average. In contrast, we find a positive, significant and substantively large effect of longer-run resources on energy intake, two indicators of diet quality, adult body mass index (BMI), and child stature. It appears that individuals and households are able to weather large economic crises at least in terms of maintaining body mass and energy intake.

This paper uses data from the Russian Longitudinal Monitoring Survey (RLMS) to examine the relationship between six dimensions of nutritional status and household resources paying special attention to the distinction between longer-run resources and short-run fluctuations in resources. Between 1996 and 1998, Russia experienced a dramatic decline in economic activity which was followed by an equally dramatic rise between 1998 and 2000. We exploit this fact in combination with the panel nature of RLMS to measure the effect of changes in household resources on nutritional status. Nutritional status appears to be very resilient to variation in household resources. Gross energy intake, adult body mass index (BMI), and child stature all change very little as expenditure deviates from its long-run average. In contrast, we find a positive, significant and substantively large effect of longer-run resources on energy intake, two indicators of diet quality, adult body mass index (BMI), and child stature. It appears that individuals and households are able to weather large economic crises at least in terms of maintaining body mass and energy intake.

Families in developing countries face enormous financial risks from major illness both in terms of the cost of medical care and the loss in income associated with reduced labor supply and productivity. We test whether access to microfinancial savings and lending institutions helps Indonesian families smooth consumption after declines in adult health. In general, results support the importance of these institutions in helping families to self-insure consumption against health shocks.

Families in developing countries face enormous financial risks from major illness both in terms of the cost of medical care and the loss in income associated with reduced labor supply and productivity. We test whether access to microfinancial savings and lending institutions helps Indonesian families smooth consumption after declines in adult health. In general, results support the importance of these institutions in helping families to self-insure consumption against health shocks.

This paper examines the extent of consumption insurance against income risk by households in rural India. We estimate the effects of income changes on consumption after controlling for aggregate shocks through changes in village level consumption and household size. We also test whether there is a systematic wealth effect on the extent of consumption insurance against idiosyncratic income shocks by classifying the households on the basis of landholding, which is the primary source of wealth for rural households in India. The null hypothesis of full insurance is rejected both for the population as a whole and for the different land classes. Our estimation results also show that consumption tracks income more closely for the poorer households - the estimated marginal propensity to consume out of idiosyncratic changes in income is significantly higher for the poorer households compared to the richer households. The results are robust to alternative estimation methodologies and alternative methods of sample stratification.