Income Risk, Coping Strategies, and Safety Nets

Poor rural and urban households in developing countries face substantial risks, which they handle with risk-management and risk-coping strategies, including self-insurance through savings and informal insurance mechanisms. Despite these mechanisms, however, vulnerability to poverty linked to risk remains high. This article reviews the literature on poor households use of risk-management and risk-coping strategies. It identifies the constraints on their effectiveness and discusses policy options. It shows that risk and lumpiness limit the opportunities to use assets as insurance, that entry constraints limit the usefulness of income diversification, and that informal risk-sharing provides only limited protection, leaving some of the poor exposed to very severe negative shocks. Public safety nets are likely to be beneficial, but their impact is sometimes limited, and they may have negative externalities on households that are not covered. Collecting more information on households vulnerability to poverty through both quantitative and qualitative methods can help inform policy.

Bibliographic Details

Main Author:	Dercon, Stefan
Format:	Journal Article biblioteca
Language:	English en_US
Published:	World Bank 2002-09-01
Subjects:	AGRICULTURAL WAGE, AGRICULTURE, ANALYSIS OF VARIANCE, ARID TROPICS, ASSET HOLDINGS, ASSET VULNERABILITY FRAMEWORK, ASSETS, BARRIERS TO ENTRY, BENCHMARK, CATTLE OWNERSHIP, CHILD GROWTH, CHILD HEALTH, CHILD LABOR, CHILD MORTALITY, CHRONIC ILLNESS, CHRONIC POVERTY, CHRONICALLY POOR, COMPARATIVE ADVANTAGE, CONSUMPTION INSURANCE, CONSUMPTION LEVELS, CONSUMPTION SMOOTHING, COPING STRATEGIES, CREDIT MARKET CONSTRAINTS, CREDIT PROGRAMS, CRISES, CROP DIVERSIFICATION, CROP INCOME, CROWDING OUT, DEPOSITS, DEVELOPMENT ECONOMICS, DOWNSIDE RISKS, DROUGHT, DYNAMIC POVERTY, ECONOMIC CRISIS, ECONOMIC FLUCTUATIONS, ECONOMIC POLICIES, ECONOMIC REFORM, ECONOMIC RESEARCH, ECONOMIC SHOCKS, ECONOMICS, ECONOMICS LITERATURE, ECONOMICS RESEARCH, ECONOMIES OF SCALE, EMPLOYMENT, EQUILIBRIUM ANALYSIS, ETHNIC GROUPS, EXPECTED UTILITY, EXTENDED FAMILIES, FAMINE, FARM ACTIVITIES, FARM HOUSEHOLDS, FARMERS, FEMALE LABOR, FINANCIAL CRISIS, FINANCIAL MARKETS, FOOD AID, FOOD CONSUMPTION, FOOD EXPENDITURE, FOOD INSECURITY, FOOD INTAKE, FOOD MARKETS, FOOD PRICES, FOOD PROCESSING, FOOD-FOR-WORK, FOREIGN EXCHANGE, FORMAL SAFETY NETS, HOUSEHOLD CONSUMPTION, HOUSEHOLD INCOME, HOUSEHOLD INCOME DIVERSIFICATION, HOUSEHOLD LEVEL, HOUSEHOLD SURVEY, HOUSEHOLD SURVEYS, HOUSEHOLD VULNERABILITY, HUMAN CAPITAL, HUMAN DEVELOPMENT, HUMAN RESOURCES, IDIOSYNCRATIC RISK, IDIOSYNCRATIC RISKS, IDIOSYNCRATIC SHOCKS, IMPACT OF SHOCKS, IMPLICIT CONTRACTS, INCIDENCE OF POVERTY, INCOME, INCOME FLUCTUATIONS, INCOME GAP, INCOME GROWTH, INCOME RISK, INCOME SHOCKS, INCOME SMOOTHING, INCOME-GENERATING ACTIVITIES, INEQUALITY, INFLATION, INFORMAL CREDIT, INFORMAL INSURANCE, INFORMAL INSURANCE MECHANISMS, INSURANCE MARKETS, INSURANCE SCHEMES, INSURANCE SYSTEMS, INTEREST RATE, INTEREST RATES, INVENTORY, LABOR FORCE, LABOR FORCE PARTICIPATION, LABOR MARKET, LABOR SUPPLY, LACK OF WATER, LANDHOLDINGS, LANDLESS, LANDLESS HOUSEHOLDS, LDCS, LIQUID ASSETS, LIQUIDITY, MACROECONOMIC POLICIES, MACROECONOMIC POLICY, MACROECONOMIC STABILITY, MANAGERIAL ECONOMICS, MARKET LIBERALIZATION, MICROFINANCE, MIGRATION, MONITORING COSTS, MUTUAL INSURANCE, NEEDY HOUSEHOLDS, NEGATIVE EXTERNALITIES, NONFARM INCOME, NUTRITION, PERMANENT INCOME, POLITICAL ECONOMY, POOR, POOR HOUSEHOLDS, PORTFOLIO, POVERTY ANALYSIS, POVERTY DYNAMICS, POVERTY ESTIMATES, POVERTY GAP, POVERTY LEVEL, POVERTY LINE, POVERTY MEASURES, POVERTY REDUCTION, POVERTY REDUCTION STRATEGIES, PRECAUTIONARY SAVINGS, PRIVATE TRANSFERS, PRODUCT MARKETS, PROFITABILITY, PUBLIC SAFETY NETS, PUBLIC TRANSFER, PUBLIC TRANSFERS, PURCHASING POWER, RECIPROCITY, RISK AVERSE, RISK COPING, RISK OF BANK FAILURE, RISK POOLING, RISK PREMIUM, RISK REDUCING, RISK REDUCTION, RISK SHARING, RISK-COPING, ROSCAS, RURAL, RURAL AREAS, RURAL COMMUNITIES, RURAL CREDIT, RURAL ECONOMY, RURAL HOUSEHOLD, RURAL HOUSEHOLDS, RURAL POVERTY, SAFETY, SAFETY NET, SAFETY NET PROGRAMS, SAFETY NETS, SAVINGS, SAVINGS BEHAVIOR, SCHOOL ENROLLMENT, SELF-INSURANCE, SHOCK, SMOOTHING CONSUMPTION, SOCIAL CAPITAL, SOCIAL DEVELOPMENT, SOCIAL PROTECTION, SOCIAL SAFETY NETS, SOCIAL SECURITY, SUPPORT NETWORKS, SUSU, TARGETED TRANSFERS, TARGETING, TARGETING MECHANISMS, TAXATION, TONTINES, TRANSACTIONS COSTS, TRANSIENT ILLNESS, TRANSIENT POVERTY, TRANSPORT, VILLAGE ECONOMIES, VULNERABLE GROUPS, VULNERABLE HOUSEHOLD, VULNERABLE HOUSEHOLDS, WAGE EARNERS, WAR, WEALTH, WEALTH DISTRIBUTION, WEATHER RISK, WEATHER SHOCKS, WORK PROGRAMS, WORKING CAPITAL,
Online Access:	http://documents.worldbank.org/curated/en/2002/09/17591806/income-risk-coping-strategies-safety-nets http://hdl.handle.net/10986/16419
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