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A 13-year panel of individuals is used to assess the effect of adult mortality shocks caused by AIDS on the short- and long-term consumption growth of surviving household members. A prime-age death brings a 7% drop in consumption in the five years following the death, but the impact of shocks is reduced after five years.

Inequality in economic development across the globe, with reference to the world development report of 2006, is discussed.

Uninsured households without access to credit markets usually cultivate low-risk crops to minimize income risk. However, low-risk crops imply lower returns. A study in Tanzania, Africa reveals that households with huge cash balances to answer for possible consumption shortages tend to engage more in high-risk activities than those without liquid assets. The poverty cycle runs as poor households engage in low-risk and low-income activities.