Search

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.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jdeveco.2005.06.009 Byline: Joachim De Weerdt (a), Stefan Dercon (b) Keywords: Full insurance hypothesis; Risk-sharing; Networks; Health shocks Abstract: Most risk-sharing tests on developing country data are conducted at the level of the village; generally, the full risk-sharing hypothesis is rejected. This paper uses detailed data on all insurance networks within a village in Tanzania; networks are not clustered but largely overlapping. We test whether full risk-sharing occurs within these networks. While village level full-insurance cannot be rejected for food consumption, we find evidence consistent with at least partial insurance of non-food consumption via networks. Author Affiliation: (a) Economic Development Initiatives, Bukoba, Tanzania and K.U. Leuven, Belgium (b) University of Oxford, UK Article History: Received 1 November 2002; Accepted 1 June 2005

Most risk-sharing tests on developing country data are conducted at the level of the village; generally, the full risk-sharing hypothesis is rejected. This paper uses detailed data on all insurance networks within a village in Tanzania; networks are not clustered but largely overlapping. We test whether full risk-sharing occurs within these networks. While village level full-insurance cannot be rejected for food consumption, we find evidence consistent with at least partial insurance of non-food consumption via networks. JEL classification: O12; O15; D12 Keywords: Full insurance hypothesis; Risk-sharing; Networks; Health shocks

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jdeveco.2005.05.008 Byline: Stefan Dercon Keywords: Economic reform; Poverty; Growth; Africa; Ethiopia Abstract: A new decomposition of poverty changes is developed to analyse the determinants of poverty changes during a period of economic reform (1989-1995) in villages in Ethiopia. Poverty fell substantially, but with diverse experiences across villages. Shocks mattered, but the main factors driving consumption changes were relative prices changes, resulting in changes in the returns to land, labour, human capital and location. The experience of the poor is mixed: one group of the poor in 1989, with relatively good land and location, outperformed all other households, while another group with much poorer endowments and location experienced virtually unchanged and persistent poverty. Author Affiliation: University of Oxford, Centre for the Study of African Economies, Manor Road Building, Oxford OX1 3UQ, United Kingdom Article History: Received 1 September 2001; Accepted 1 May 2005

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

A new decomposition of poverty changes is developed to analyse the determinants of poverty changes during a period of economic reform (1989-1995) in villages in Ethiopia. Poverty fell substantially, but with diverse experiences across villages. Shocks mattered, but the main factors driving consumption changes were relative prices changes, resulting in changes in the returns to land, labour, human capital and location. The experience of the poor is mixed: one group of the poor in 1989, with relatively good land and location, outperformed all other households, while another group with much poorer endowments and location experienced virtually unchanged and persistent poverty. JEL classification: O12; Q12; I32 Keywords: Economic reform; Poverty; Growth; Africa; Ethiopia

Using panel data from rural Ethiopia, the article discusses the determinants of consumption growth (1989-1997), based on a microgrowth model, controlling for heterogeneity. Consumption grew substantially, but with diverse experiences across villages and individuals. Rainfall shocks have a substantial impact on consumption growth, which persists for many years. There also is a persistent growth impact from the large-scale famine in the 1980s, as well as substantial externalities from road infrastructure. The persistent effects of rainfall shocks and the famine crisis imply that welfare losses due to the lack of insurance and protection measures are well beyond the welfare cost of short-term consumption fluctuations. Keywords: Risk; Growth; Persistence; Famine

We use public transfers in the form of food aid to test for the presence of risk sharing arrangements at the village level in rural Ethiopia. We reject perfect risk-sharing, but find evidence of partial risk-sharing via transfers. There is also evidence consistent with crowding out of informal insurance linked to food aid programmes.

Imperfect credit markets force households to use their savings for investment. Profitable activities often require lumpy investments, limiting entry by poorer households, resulting in increasing welfare differences. In Tanzania, cattle are a profitable but lumpy investment and a liquid asset for consumption smoothing. Richer households own substantial cattle herds, while poorer households specialize in low return, low risk activities. A dynamic programming model and simulations are presented to analyze entry into asset accumulation under income risk. The evidence suggests that households with lower endowments are less likely to own cattle and returns to their endowments are lower. JEL classification: Q12; O16; O55; I312; J24 Keywords: Risk; Borrowing constraints; Income diversification; Accumulation

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.

The effects of shocks to teachers, such as health problems, on the level of student learning, are evaluated. Results show that an increase of 5% in teacher absenteeism in a subsample, which is often caused by the teachers' illness or that of their family members, decreases the rate of learning by four to eight percent. The impact of HIV or AIDS on teacher absenteeism in Zambia is discussed.