wage shocks and consumption variability in mexico during the 1990s this paper presents evidence on the relationship between shocks to relative male wages and changes in household consumption in mexico during the 1990s decade which is a period characterized by high volatility apart from performing analysis of this type for mexico for the first time the paper has mainly two contributions the first is the use of alternative data sources to construct instrumental variables for wages the second is to examine differences across four consumption categories nondurable goods durable goods education and health our results for nondurable goods consumption reject the hypothesis that mexican households are able to ensure idiosyncratic risk for the comparisons across consumption categories the conclusion is that households in mexico tend to react to temporary shocks by contracting the consumption of goods that represents longer run investment in human capital which makes them more vulnerable in the future

democracy volatility and economic development growth stability is an important objective because development requires sustained increases in income because volatility is costly for the poor and because volatility deters growth we study the determinants of average growth and its volatility as a two equation system and find that higher levels of democracy and diversification lower volatility whereas volatility itself reduces growth muslim countries instrument for democracy and measures of diversification identify volatility in contrast to the lack of consensus on the democracy growth relationship the democracy stability link is robust rather than focus on growth this paper forges an alternative link between democracy and development through the volatility channel

credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

consumption vulnerability to risk in rural pakistan abstract as one of the dimensions of vulnerability this paper empirically investigates the inability of rural dwellers to cope with negative income shocks a variable coefficient regression model is applied to a two period household panel dataset collected in the north west frontier province pakistan an area with high incidence of income poverty and low human development the empirical model allows for a different ability to smooth consumption approximated by a linear function of households attributes and controls for the endogeneity of observed changes in income using qualitative information on subjective risk assessment estimation results show that the ability to cope with negative income shocks is lower for households that are aged landless and do not receive remittances regularly

agroindustrialization globalization and international development an overview of issues patterns and determinants this paper offers an overview for a special issue on agroindustrialization globalization and international development it sets out a conceptual framework for understanding the links among these three broad phenomena and then discusses emerging issues and evidence concerning the factors conditioning agroindustrialization in developing countries and the subsequent effects on employment poverty and the natural environment we conclude with a research agenda

estimating households vulnerability to idiosyncratic and covariate shocks a novel method applied in madagascar households in developing countries are frequently hit by severe idiosyncratic and covariate shocks leading to high consumption volatility a household s currently observed poverty status might therefore not be a good indicator of the household s general vulnerability to poverty in the recent years there has been an emerging literature on the concept and empirical analysis of vulnerability but because of strong data requirements for vulnerability analysis and limited availability of panel and shock data for developing countries static poverty analysis still dominates empirical vulnerability studies in this paper we propose a simple method to empirically assess the impact of idiosyncratic and covariate shocks on households vulnerability which can be applied in a wide context as it relies on more commonly available cross sectional or short panel data we empirically illustrate our approach for madagascar we show that covariate shocks have a relatively higher impact on rural households whereas idiosyncratic shocks have a relatively higher impact on urban households vulnerability

consumption smoothing and the welfare consequences of social insurance in developing economies studies of risk in developing economies have focused on consumption fluctuations as a measure of the value of insurance a common view in the literature is that the welfare costs of risk and benefits of social insurance are small if income shocks do not cause large consumption fluctuations we present a simple model showing that this conclusion is incorrect if the consumption path is smooth because individuals are highly risk averse hence social safety nets could be valuable in low income economies even when consumption is not very sensitive to shocks

assessing the case for social experiments rs ecent academic debates pit two alternative approaches to policy evaluation against one another the first is the experimental approach based on the random assignment of accepted program applicants to a recipient or treatment group and a non recipient or control group the second is the nonexperimental or econometric approach that uses a variety of microdata sources statistical methods and behavioral models to compare the outcomes of participants in social programs with those of nonparticipants the central question addressed in this paper is whether or not randomized social experiments aid in securing answers to basic questions about the evaluation of social programs there are many distinct and complementary approaches to the study of the impact of public policy including full general equilibrium analysis of policy impacts tinbergen 1956 auerbach and kotlikoff 1987 shoven and whalley 1992 kydland and prescott 1991 and less ambitious partial equilibrium microeconomic structural research programs such as those designed to estimate the impact of taxes on labor supply both approaches offer answers to many interesting counterfactual policy questions but their credibility rests critically on the quality of the empirical input used to generate their answers

determinants and impacts of rural land market activity evidence from nicaragua summary use of data from nicaragua to examine the performance of land rental and sales markets during 1995 98 which coincide with the implementation of major macroeconomic and sectoral reforms leads to three main conclusions first even though the data point toward an inverse farm size productivity relationship and large differences in land productivity between large and small producers land markets have not led to an equalization of returns among the groups considered second both in 1995 and in 1998 land sales markets have contributed to land concentration suggesting that credit market imperfections impeded demand in land sales markets third the policy reforms undertaken after 1995 have led to a structural shift in the performance of the land rental market instead of transferring land to large owners as it did in 1995 the land market now moves land from large to small producers the quantities involved however remain limited we conclude that if it is to contribute to equity and efficiency liberalization of land sales markets has to be complemented by measures to reduce the attractiveness of speculative land accumulation furthermore measures to reduce the transaction costs of land rental e g titling and to increase effective demand from small producers e g technical assistance and credit will be needed 2003 elsevier ltd all rights reserved

the role of savings and credit in coping with idiosyncratic household shocks abstractthis study examines the effect of access to formal banking services on households ability to smooth consumption in response to illness of adult workers the institutional peculiarities of indonesia s largest commercial bank are exploited to separately estimate the effects of access to formal credit from savings the means by which households smooth consumption differs depending on their access to formal services those with access to formal credit increase borrowing from banks while those with access only to formal savings but not credit draw down on savings households without access to formal banking services end up liquidating productive assets

long term consequences of short term precipitation shocks evidence from brazilian migrant households we find that large short term precipitation shocks damage the long term income of households that have permanently migrated from rural to urban areas this outcome is consistent with the behavior of credit constrained rural households who are willing to accept lower long term income in urban areas following the depletion of their productive assets during an adverse shock our empirical evidence suggests that there may be a link between large precipitation shocks in rural areas and urban poverty further exploration is warranted on the mechanisms by which natural disasters cause these long term losses

poverty traps and index based risk transfer products summary a growing literature suggests that in low income countries households with few assets can be trapped in chronic poverty this article reviews relevant threads of the poverty traps literature to motivate a description of the opportunities presented by innovative index based risk transfer products these products can be used to address some insurance and credit market failures that contribute to the persistence of poverty among households in low income countries applications are considered at the micro meso and macro levels 2008 elsevier ltd all rights reserved

the economic consequences of health shocks evidence from vietnam this paper finds that the incomes of urban households are more vulnerable to health shocks than rural households that health shocks may precipitate increases in unearned income that partially offset reductions in earned income and large increases in medical spending even among insured households it also finds that households spend less on food following a health shock but more on budget items such as housing and electricity measures of household health shocks used include a recent death of a working age household member a long inpatient spell and a recent sizeable drop in the body mass index of the household head

risk pooling between households and risk coping measures in developing countries evidence from rural bangladesh abstract using data from rural bangladesh i test whether income risks are pooled among villagers between neighboring households and between related households living in different villages i find evidence that risks to food consumption are pooled between neighboring households and between related households but not among villagers as for nonfood consumption i find little evidence of risk pooling except between unrelated neighboring households i also find that while households belonging to a neighborhood network do not take any special measures during an economic hardship those not belonging to any such network try to smooth consumption by selling off livestock and other assets and by getting interest free loans negative income shocks are found to have little effect on labor supply or private transfers

behavioral responses to risk in rural china does risk perpetuate poverty in a credit constrained economy jalan and ravallion study portfolio and other behavioral responses to measured risk using household panel data for rural china one quarter of wealth is held in unproductive liquid forms but only a small share of this appears to be a precaution against income risk the authors estimate that eliminating income risk would reduce the share of wealth held in liquid form by less than 1 percentage point moreover that effect is confined largely to middle income groups high income households do not it seems need to hold unproductive cautionary wealth and the poor probably cannot afford to do so the authors find no evidence that income risk discourages schooling but risk does inhibit the out migration of labor generally the results provide only limited support for the idea that uninsured risks promote unproductive portfolio behavior in this setting there is such an effect but it is small in magnitude and cannot be deemed an important cause of poverty

impact of off farm income on food expenditures in rural bangladesh an unconditional quantile regression approach this study examines the effects of off farm income on food expenditures of rural bangladeshi households our analysis yields unbiased estimates of the unconditional impact of off farm income on food expenditures and reveals the heterogeneous effects that occur across the distribution of total food consumption expenditures the findings suggest that the impacts of off farm income are uniformly positive across the unconditional quantile regression and significantly increase food consumption expenditures for all quantiles except for the 25th quantile in addition we found that schooling experience and location of the household increase the food expenditures of rural households most importantly this article argues that female headed rural households in which the female works off the farm tend to have significantly lower food expenditures

are there dynamic gains from a poor area development program poor area development programs in which the government transfers extra resources to unusually poor areas have been widely used to fight poverty there has been some research on such programs but little is known about their impact on household living standards over time the authors address the issue for a sizable poor area development program in rural china china s program had a significant impact on rural living standards in the targeted areas of the sample the consumption growth model suggests that households living in the targeted areas had a higher rate of consumption growth than one would have otherwise expected nonetheless the authors found that while the gains in growth were enough to prevent an absolute decline in average living standards they were not enough to reverse the strong underlying divergent tendencies in the rural economy

do social protection transfers reduce poverty and vulnerability to poverty in pakistan household level evidence from punjab empirical studies in different developing countries have investigated the impact of social protection sp on ex post poverty however few studies analysed the impact of sp on ex ante vulnerability to poverty vtp this paper contributes to the literature by evaluating the impact of sp on vulnerability to poverty vtp and poverty rates among households in the punjab province of pakistan a hierarchical modelling approach is used to analyse the multiple indicator cluster survey mics 2011 data of about 90 000 households matching methods and simultaneous endogenous switching regression are used to control for potential selection bias and estimate average treatment effects our results show that sp has a positive impact in reducing household poverty and vtp but this impact is mainly driven by a short term flood relief cash transfer programme pension of government employees and households regular purchase from utility store network

precautionary behavior migrant networks and household consumption decisions an empirical analysis using household panel data from rural china abstract we develop a test of precautionary behavior in the consumption decisions of rural agricultural households among surveyed households facing a median level of consumption risk 10 of savings can be attributed to a precautionary motive and this increases to 15 for households with consumption per capita below the poverty line we next use distant lags of local rainfall shocks uncorrelated with current consumption growth to identify the size of migrant networks outside the village and then present evidence that both poor and nonpoor households engage in less precautionary saving as the size of the village migrant network increases

social capital and coping with economic shocks an analysis of stunting of south african children abstract south african households live in an environment characterized by risks and many face a significant probability of experiencing economic losses that threaten their daily subsistence using household panel data that include directly solicited information on economic shocks and employing household fixed effects estimation we explore how well households cope with shocks by examining the effects of shocks on child nutritional status unlike in the idealized village community some households appear unable to insure against risk particularly when others in their communities simultaneously suffer large losses households in communities with more social capital however seem better able to weather shocks

poverty and household size the widely held view that larger families tend to be poorer in developing countries has influenced research and policy the scope for size economies in consumption cautions against this view we find that the correlation between poverty and size vanishes in pakistan when the size elasticity of the cost of living is about 0 6 this turns out to be the elasticity implied by a modified version of the food share method of setting scales by contrast some measures of child nutritional status indicate an elasticity of unity consideration of the weight attached to child versus adult welfare may help resolve the non robustness of demographic profiles of poverty excerpt

formal and informal risk sharing in ldcs theory and empirical evidence in village economies limited commitment models have been proposed as theoretical alternatives to the complete markets hypothesis and have been shown to be empirically relevant yet village institutions might be able to enforce some contracts we construct a theoretical model which shows how households can insure through both formal and informal contracts when some verifiable production takes place in an environment of incomplete markets this theoretical setting nests the case of complete markets when all risks can be insured by formal contracts because all states of nature would be verifiable and the case where only informal agreements are available agreements specifying informal transfers that needs to be self enforceable we derive two equations of interest the income equation which is partially determined by the formal contract and an euler type equation where consumption growth is affected by lagged consumption instead of being a martingale using semi parametric specifications we derive testable restrictions of our model we estimate both equations using data of village economies in pakistan empirical results are consistent with the model the estimation and allows to show that the incentive constraints due to selfenforcement bind and that formal contracts are used to reduce the probability of binding the constraint

long term impacts of droughts on labour markets in developing countries evidence from brazil abstract climate shocks have well documented impacts on the short term welfare of rural households in developing countries we investigate the impact of droughts on brazilian labour markets we find long term rural wage losses beyond the immediate impact of the drought with affected workers taking five years to catch up with their peers findings are robust to model specification the severity of the losses varies with the dependence on agricultural income supporting the notion of diversifying portfolio strategies in rural areas to reduce climate related income risk

household consumption smoothing through ethnic ties evidence from cote d ivoire abstract this paper investigates the hypothesis that households in cote d ivoire take part in spatially diversified risk sharing arrangements with members of their own ethnic group empirical tests are presented using several estimation methods to deal with heteroscedasticity measurement error and extreme value problems to examine whether results are robust across estimation procedures the hypothesis of complete risk sharing within ethnic groups is rejected however there appears to be some partial insurance performed by individual households with other members of the same ethnic group particularly for the households residing in the regions least likely to have access to formal financial arrangements

income shocks consumption wealth and human capital evidence from russia abstract using the russia longitudinal monitoring survey this article investigates how russian households consumption responds to income shocks and in particular how household wealth and human capital affect the households ability to smooth consumption an instrumental variable estimation method with household fixed effects is implemented after correcting for potential problems of sample attrition using the inverse probability weighting method the article finds that household consumption in russia is only partially protected from idiosyncratic shocks the analysis also provides evidence that wealthier households can better smooth their consumption furthermore changes in income have less impact on consumption when households have members with higher education levels wealth effects are more pronounced in rural areas while education effects are stronger for urban households

an overview of assessments of the impact of the uruguay round on agricultural prices and incomes abstract this paper presents a synthesis of results from various models that have assessed the impact of the uruguay round on global agriculture the results on the whole show that the uruguay round is not expected to cause large price and income effects at the global level the effects are likely to be more significant for individual regions and countries the paper identifies a number of factors explaining the differences in the impact assessed using various models these include partial or non incorporation of the specific reduction commitments under the uruguay round different practices followed in modelling tariff reductions differences in transmission elasticities use of different base periods to apply uruguay round reduction commitments model structure i e partial versus general equilibrium different aggregation of countries and commodities and differences in the demand supply and transmission elasticities

is consumption smooth at the cost of volatile leisure an investigation of rural india this study examines the institutions in rural india that enable households to insure against unanticipated idiosyncratic shocks to income using a decentralized general equilibrium model it tests for consumption and leisure insurance against unanticipated income shocks it is found that differential access to markets particularly financial markets force villagers to differ in their response to similar shocks medium and large farmers have unrestricted access to credit markets and are unaffected by unanticipated changes in household income the small farmers are excluded from credit markets however some of the small farmers are able to insure consumption against unanticipated income shocks through compensating changes in labour market participation and reducing own farm work

trade and agroindustrialization in developing countries trends and policy impacts there have been important changes in the international trade of processed and high value added food products from developing countries over the past several decades one of them has been the emergence of oilseeds and fruits and vegetables replacing traditional products such as sugar coffee and cocoa as the main exports from developing countries another trend has been the collapse of african agroindustrial exports and the increase of exports from asia the paper highlights key trends and explores possible reasons for the trends focusing on trade policies in less developed countries ldcs and developed countries dcs the paper argues that national trade policies and other economic policies appear to have been relatively supportive of agroindustrial production and exports in asia in contrast policies have had more mixed effects in latin america and the caribbean lac and seem to have been just one component in a larger array of forces inhibiting economic development in africa the performance of agroindustrial production and exports from ldcs may be now more dependent than ever on the completion of reforms in the agricultural trade policies of dcs for africa however a more supportive international environment and better macroeconomic and trade policies will not be enough to ensure a thriving agroindustrial sector within a broader process of economic development until military confrontations stop

inequality aversion health inequalities and health achievement this paper addresses two issues the first is how health inequalities can be measured in such a way as to take into account policymakers attitudes towards inequality the gini coefficient and the related concentration index embody one particular set of value judgements by generalising these indices alternative sets of value judgements can be reflected the other issue addressed is how information on health inequality can be used together with information on the mean of the relevant distribution to obtain an overall measure of health achievement

what do we know about economic growth or why don t we know very much summary the last 10 years has seen an explosion in cross country econometric studies of growth driven by two factors new mathematical models of the growth process that lend themselves to econometric testing and new data sets that make such testing possible this paper looks at a selective review of these studies it concludes that the results are disappointing in that no model has proven robust to trial by repeated regression the paper suggests some reasons for this including that the tested models tend to be ahistorical and over simple in terms of their causal accounts it concludes with possible lessons for econometric work in this area 2000 elsevier science ltd all rights reserved

distribution and growth in models of imperfect capital markets abstract a full analysis of the distribution of income should include both the inequality in income between different generations of the same family what is usually called intergenerational ocial mobility and the inequality in income between different families in the same generation becker tomes 1979 p 1154

consumption versus asset smoothing testing the implications of poverty trap theory in burkina faso abstract despite solid theoretical foundations for the notion that poor borrowing constrained households will intertemporally manage assets to smooth consumption the consumption smoothing hypothesis has not always withstood empirical scrutiny this paper reassesses the intertemporal asset management problem with a poverty trap model and shows that we would expect to see asset smoothing not consumption smoothing in the neighborhood of critical asset levels at which optimal accumulation behavior bifurcates we then employ threshold estimation techniques to empirically confirm the co existence of consumption and asset smoothing regimes using a household panel data set from west africa households above the estimated threshold almost completely insulate their consumption from weather shocks whereas those below the threshold do not these results not only indirectly provide evidence of the existence of poverty traps but also speak to the level and incidence of the costs of uninsured risk

arsenic mitigation in bangladesh a household labor market approach rural families in bangladesh one of the poorest countries in the world face financial risks from major illness both from the cost of medical care and from the loss of income associated with reduced labor supply and productivity chronic exposure to arsenic in drinking water has often been associated with the development of skin cancers and internal cancers especially of the bladder liver and lungs and a wide variety of other health conditions such as diabetes respiratory problems cardiovascular diseases hyperpigmentation hypopigmentation and keratosis a condition in which painful nodules grow on the palms of the hands and soles of the feet most of the economic work on arsenic contamination in bangladesh has had an epidemiological focus that has tried to effectively monetize a dose response relation using either a cost of illness or a willingness to pay approach

income smoothing and consumption smoothing one way that risk averse households protect consumption levels is to borrow and use insurance mechanisms another way common in low income economies is to diversify economic activities and make conservative production and employment choices households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance typically both types of mechanisms are studied independently but much more can be learned by studying them together first we obtain a more complete picture of risks costs and insurance possibilities second it opens the way to considering biases in standard tests of credit and insurance

informal risk sharing in an infinite horizon experiment author s charness gary b genicot garance abstract this paper presents the first laboratory study of risk sharing without commitment our experiment captures the main features of a simple model of voluntary insurance between two agents in the model two individuals interact over a potential infinite horizon and suffer random income shocks risk averse individuals have incentives to smooth consumption by making transfers to each other these transfers being voluntary only self enforcing risk sharing arrangements are possible transfers can never be so large as to tempt individuals to renege on them this constraint when binding has strong implications for the shape of the constrained optimal risk sharing arrangement in our experiment participants are matched in pairs each period one of them randomly drawn receives a given amount in addition to its regular income after observing both incomes each person in a pair chooses a non negative transfer to make to the other person two features of the experimental design are crucial first it is common information that all pairs will be dissolved at the end of each period with a given probability participants are informed when this occurs and randomly re matched this replicates the effect of infinite horizon and discounting in the model second at the end of the experiment a single period is randomly drawn to count for cash payment this feature is essential for individuals to care about the utility outcome of each period we find evidence generally consistent with risk sharing with most transfers coming from individuals who received h in the period moreover in support of the theory transfers are much higher with a higher continuation probability and they also are highly correlated with the individual s degree of risk aversion however while the model predicts an increase in transfers with ex ante inequality we observe the opposite effect this may reflect considerations of identity or group membership

processed food exports from developing countries patterns and determinants abstract a noteworthy recent development in world trade is the rapid expansion of processed food exports this development and its policy implications have received little attention in the literature on export led industrialisation in developing countries dcs the purpose of this paper is to redress this oversight firstly by providing an overview of the growth patterns of processed food exports and then examining the determinants of inter country differences in growth performance the results point to the growing importance of food manufacturing as a dynamic export line for many dcs there is also evidence that the policy regime is far more important than resource endowments and other country specific factors in explaining inter country differences in export success in this product area as in the case of conventional manufactured exports

asset smoothing consumption smoothing and the reproduction of inequality under risk and subsistence constraints abstract a growing literature asks whether low wealth agents can accumulate assets over time or whether they are trapped in poverty this paper develops a stochastic dynamic programming model with endogenous asset price risk to explore savings and portfolio decisions in a resource poor environment characterized by risk and subsistence constraints optimal portfolio strategies are found to bifurcate despite divisible assets and fully rational agents wealthier agents acquire a higher yielding portfolio and pursue conventional consumption smoothing poorer agents acquire a less remunerative portfolio and pursue asset smoothing rather than consumption smoothing asset based risk coping thus results in positive correlation between initial wealth and portfolio rate of return

a heterogeneous agent model of credit linked index insurance and farm technology adoption abstract protection from downside risk is a determinant of technology uptake among subsistence agricultural households access to credit insurance and savings may stimulate technology adoption where new methods are riskier but higher yielding or require sunk costs in this paper we employ a dynamic stochastic heterogeneous agent model where farm households have access to contingent credit and make savings technology and loan repayment choices our approach is novel as insurance is modeled as a meso level product where the bank is indemnified before any payouts are distributed to borrowers thus it accounts for both supply and demand side concerns showing a flow of effects when index insurance contracts are sold to risk aggregators for whom basis risk is lower results show letting the lender lay first claim on indemnities lowers default which can decrease interest rates and expand credit access insurance and savings may also spur technology uptake

gone with the storm rainfall shocks and household well being in guatemala this paper investigates the causal consequences of tropical storm agatha 2010 the strongest tropical storm ever to strike guatemala since rainfall records have been kept on household welfare the analysis reveals substantial negative effects particularly among urban households per capita consumption fell by 12 6 percent raising poverty by 5 5 percentage points an increase of 18 percent the negative effects of the shock span other areas of human welfare households cut back on food consumption 10 percent or 43 to 108 fewer calories per person per day and reduced expenditures on basic durables these effects are related to a drop in income per capita 10 percent mostly among salaried workers adults coped with the shock by increasing their labor supply on the intensive margin and simultaneously relying on the labor supply of their children and withdrawing them from school impact heterogeneity is associated with the intensity of the shock food price inflation and the timing of agatha with respect to the harvest cycle of the main crops the results are robust to placebo treatments household migration issues of measurement error and different samples the negative effects of the storm partly explain the increase in poverty seen in urban guatemala between 2006 and 2011 which national authorities and analysts previously attributed solely to the collateral effects of the global financial crisis

consumption insurance an evaluation of risk bearing systems in low income economies the hypothesis of full risk sharing can be taken to data from low income countries and evaluate formal and informal financial systems in many contexts idiosyncratic risks are high so credit insurance arrangements could be beneficial statistical tests reveal that households in southern india take advantage of these possibilities villages in cote d ivoire and countries in thailand do not do as well the paper includes an empirical description of the devices used to smooth consumption and a theoretical discussion of private information and incentives on ideal operating systems the full information and mechanism design frameworks provide benchmarks for policy analysis

open economies work better did africa s protectionist policies cause its marginalization in world trade in the mid 1950s sub saharan africa accounted for 3 1 percent of global exports by 1990 this share had fallen to 1 2 percent the authors of this report find that africa s extensive loss of competitiveness played a key role in its decline in world trade if africa had merely retained its 1962 64 oecd organization for economic cooperation and development market shares its exports now would be 75 percent higher africa s problem was two pronged 1 it experienced declining market shares for its major export products which in turn were of declining relative importance in world trade and 2 it was unable to diversify its export base empirical evidence developed by the authors shows that external protection has not played a major role in this decline in fact oecd trade preferences gave africa an advantage over many exporters trade restrictions and domestic policy interventions often create a bias against tradables especially exports that prevents the achievement of otherwise attainable growth rates import barriers in africa are far higher than in developing countries with faster export growth and appear to work against potential export products if the region is to reverse its unfavorable export trends it must adopt trade and structural adjustment policies that help make it competitive and help african exporters capitalize on foreign trade opportunities

the impact of the uruguay round on tariff escalation in agricultural products abstract tariff escalation i e higher tariffs on processed agricultural products than on their input commodities has been one of the obstacles for developing countries in their efforts to establish processing industries for exports this article assesses the changes in tariff escalation resulting from the uruguay round ur tariff concessions examining the agricultural import markets of eu japan and the us the approach consisted of comparing the base and bound tariffs as listed in the ur tariff schedules of actual input output processing relationships taking also specific tariffs into account three main conclusions can be drawn first more than half of the commodity pairs have positive tariff wedges escalating tariffs about 10 per cent have no tariff wedges input and output tariffs are equal and the remaining one third of the commodity pairs have negative tariff wedges de escalating tariffs these numbers are roughly the same for both base and bound tariff wedges second as a result of the ur tariff concessions more than 80 per cent of the tariff wedges have decreased in absolute values i e positive wedges have become less positive and negative wedges have become less negative convergence towards zero is therefore a common feature third after the full implementation of the ur tariff concessions high levels of nominal tariff escalation will still remain for a number of commodity pairs highest in japan and lowest in us considering only the positive tariff wedges these will average 17 per cent after the implementation of the ur down from 23 per cent of the base years finally the study has certain methodological shortcomings and a degree of caution is in order for countries contemplating export diversification and investing in valued added industries there are well known problems with water in the tariffs and the difference between applied and bound rates of duty that are common to all studies on this subject in addition a number of factors that are beyond the scope of this study should also be taken into account when export diversification is considered these relate inter alia to the competitiveness of the export commodities or industries in question availability of appropriate technologies and infrastructure product standards technical regulations and a host of consumer preference issues having to do with brand recognition as well as product characteristics

who benefits more from higher household consumption the intra household allocation of nutrients in china abstract previous studies find that human capital investments in boys are less income elastic than investments in girls attributing this result to favoritism toward boys i show theoretically that it is plausible for more productive or favored household members to have higher income elasticities i then investigate this question empirically utilizing panel data on individual nutrient intake from the china health and nutrition survey chns to analyze how changes in household per capita nutrient intake affect the intra household allocation of nutrients to deal with potential biases due to omitted variables and simultaneity i use measures of rainfall variation as instruments i find that nutritional intakes are more elastic for males especially prime age men than for females and significantly less elastic for the elderly

wealth weather risk and the composition and profitability of agricultural investments despite the growing evidence that farmers in low income environments are risk averse there has been little empirical evidence on the importance of risk in shaping the actual allocation of production resources among farmers differentiated by wealth the authors use panel data on investments in rural india to examine how the composition of productive and nonproductive asset holdings varies across farmers with different levels of total wealth and across farmers facing different degrees of weather risk income variability is a prominent feature of the experience of rural agents in low income countries the authors report evidence based on measures of rainfall variability that the agricultural investment portfolio behavior of farmers in such settings reflects risk aversion due evidently to limitations on consumption soothing mechanisms such as crop insurance or credit markets the authors results suggest that uninsured weather risk is a significant cause of lower efficiency and lower average incomes a one standard deviation decrease in weather risk measured by the standard deviation of the timing of the rainy season would raise average profits by up to 35 percent among farmers in the lowest wealth quartile moreover rainfall variability induces a more unequal distribution of average incomes for a given distribution of wealth wealthier farmers are willing to absorb significant risk without giving up profits to reduce production risk smaller farmers have to invest their limited wealth in ways that reduce their exposure to risk at the cost of lower profit rates the authors found that at high levels of rainfall variability differences in rates of profit per unit of agricultural assets were similar across classes of wealth but over the sample range of rainfall variability these rates of profit were always higher for the poorer farmers than for the wealthier ones suggesting that the disadvantages of small farmers in risk diffusion are more than offset by their labor cost advantage

escaping poverty and becoming poor who gains who loses and why abstract different households have followed very different economic trajectories this study of 35 north indian villages shows members of 11 1 of 6 376 households in these villages have overcome poverty in the last 25 years while members of another 7 9 have fallen into poverty households escape from poverty is assisted by one set of factors but an entirely different set of factors is associated with households decline two distinct sets of policies are required thus one set to promote escape from poverty and another set to arrest decline into poverty poverty has some distinctly local antecedents a methodology for tracking changes in poverty at the local level is developed that community groups and others can use to assess change and examine causes

is informal risk sharing less effective for the poor risk externalities and moral hazard in mutual insurance abstract poor farm households are less keen to adopt high risk high return technologies than rich households yet the poor are more vulnerable to income shocks we develop a model of endogenous risk taking to explain these facts in autarky poor households adopt less risky production plans and obtain lower expected returns but face higher relative risk than the rich the introduction of risk sharing generates negative risk externalities between agents at the first best the social planner imposes a homogeneous level of risk taking in the group at the second best risk taking is not enforceable and increases with insurance generating moral hazard interestingly the poor s risk taking behavior is more sensitive to insurance the social planner thus mitigates risk taking by applying a lower insurance coverage in poor groups the introduction of risk sharing therefore reinforces the gap between rich and poor in terms of expected income and absolute risk while the effect on relative risk is ambiguous

dowry and intrahousehold bargaining evidence from china this paper analyzes the relationship between a woman s intrahousehold bargaining position and her welfare within marriage using household data from rural china simultaneity problems are overcome by using dowry to proxy for bargaining position omitted variable bias is addressed by using grain shocks in the year preceding marriage as an instrument for dowry instrumented dowry positively impacts numerous measures of a wife s welfare including household purchases the time allocation of household members and the woman s satisfaction with life offering strong evidence in support of collective models of the household

social transfers and growth what do we know what do we need to find out summary the paper examines the extent to which emerging social transfer programs in developing countries can improve the productive capacity of households in poverty and contribute to micro level growth it introduces a basic framework linking transfers to growth mediating processes and productive capacity outcomes this is then used to organize and assess relevant findings from program evaluation studies the paper concludes that social transfer programs can have positive effects on the productive capacity of poor and poorest groups but further research is needed to identify and measure the size and significance of these effects

causes of world trade growth in agricultural and food products 1951 2000 a demand function approach the objective of the present study is to analyse the causes of the growth of international agricultural and food trade in volume terms from 1951 to 2000 the results suggest that income growth has been the principal reason for this expansion while exchange rate stability and the real price of agricultural products played only a minor role multilateral trade liberalization and trade costs given their long term stability are not elements that could have stimulated their growth finally the intensive liberalization of trade which took place in various economic regions especially in europe became a key factor in promoting agricultural trade among the countries participating in regional trade agreements the study results also indicate that the determinants of trade growth for these goods were different to those for other goods and other periods

is transient poverty different evidence for rural china we define transient poverty as the component of time mean consumption poverty at household level that is directly attributable to variability in consumption this can be thought of as a measure of vulnerability to falling consumption the non transient component then depends solely on mean consumption over time and we call this chronic poverty using robust semi parametric methods and household panel data for rural china we test whether transient poverty is determined by a process that is similar to chronic poverty commonly identified causes of poverty in this setting have weak explanatory power for transient poverty and some of the factors determining transient poverty do not matter to chronic poverty or even have the opposite effect successful policy responses to chronic poverty may still leave considerable transient poverty

risk and insurance in village india comment the protection of poor households in high risk agrarian economies from shocks to their incomes has often been seen as a compelling motive for various forms of policy intervention including transfers of cash or food credit subsidies and public employment schemes for a survey see lipton and ravallion 1995 the desirability of such safety net policies clearly depends on how well pre existing risk sharing arrangements work while it is commonly thought that without effective policy intervention rural households are vulnerable to village wide shocks such as adverse prices or poor rains it is less clear to what extent risk sharing institutions within the village mitigate the effects of idiosyncratic income risk stemming for instance from ill health or localized crop damage 2 several recent papers have used household level data to implement tests of risk sharing that might inform such concerns 3 these tests are based on the proposition that with perfect risk sharing consumption at the household level should be insured against idiosyncratic risks and thus depend solely on the realization of the aggregate risk wilson 1968 diamond 1967 townsend 1994 tests this implication of perfect intra village risk sharing using longitudinal household data on consumptions and incomes for three villages in india he reports that the full insurance hypothesis provides a surprisingly good benchmark in that household consumptions co move and do not appear to be much influenced by contemporaneous own income our aim here is to examine the robustness of this potentially important finding we have two main concerns the first is that the specification townsend adopts potentially biases his test towards the null hypothesis of full insurance because it yields inconsistent estimates of the key test parameter under a plausible alternative we therefore estimate a different specification that generates consistent estimates under both the null and the alternative our second concern is that a particular form of measurement error in the consumption data townsend uses may have further biased his results toward the null hypothesis of full insurance to address this concern we use an instrumental variables procedure when we implement the test of consumption insurance with townsend s consumption data we also re estimate the test equations with a measure of consumption derived from the same underlying primary data by an alternate method finally townsend reports 1discussions with robert townsend stimulated our interest in this investigation the staff of the

consumption smoothing and hiv aids the case of two communities in south africa abstract hiv aids threatens to overstretch the already frail informal safety nets in countries heavily affected by the epidemic potentially making it difficult for households with hiv positive members to keep up appropriate consumption levels when experiencing shocks these households may in addition face exclusion from informal insurance networks because of widespread stigmatization surprisingly the resilience of informal networks to hiv related shocks and their uncertain worth for afflicted households in particular have not been empirically tested to date using 3 years of a novel panel data set from two poor south african communities experiencing hiv related illnesses and deaths we investigate the ability of households to insure their consumption we find little evidence that affected households show an extra propensity to consume out of income changes which indicates that these households can rely on informal insurance to the same degree as their nonaffected peers however on the basis of the

virtual land use and agricultural trade estimating environmental and socio economic impacts abstract liberalization has caused an increase in the global trade of goods and services in particular the value and physical volume of agricultural goods traded have largely increased as the environmental and social consequences of trade are complex they are rarely included in the national and international agricultural policies one reason is that there is a lack of concepts and methods for assessing the environmental and social impacts of trade policies in this paper we develop a method for quantifying and assessing the land use hidden in the export and import of agricultural goods for the case of switzerland for our analysis we focus on arable crops the first methodological step of our research illustrates the spatial relationship of switzerland with countries all over the world through the import and export of land use for arable crops the second step links this spatial dimension with a qualitative assessment of the environmental and socio economic impacts of agricultural land use we applied the method to the case of wheat cultivation within switzerland and import to switzerland the major problem we were confronted with was the availability of data which had both to be reliable and available for the countries wheat is imported from the results show that the calculation of land use is credible in spite of the problems related with data availability the assessment results for each indicator are in agreement with the current situation in the respective countries in addition the aggregation seems to accurately reflect the countries agricultural polices the developed method is used to estimate the overall environmental and socio economic impacts of an increase in wheat imports to switzerland we argue that this method could be applied for anticipating potential impacts of trade agreements still further research is required for fine tuning of the utility functions including a weighting procedure in the aggregation procedure for practical applications important aspects like water shortage should enlarge our limited set of indicators in addition the average impact on a country level was assessed to refine that different agricultural systems ranging from intensive to extensive to organic should be considered beyond our scope was to analyze impacts due to other life cycle stages than the agricultural production for informed decision however information on the whole life cycle of agricultural products is required

risk coping and starvation in rural china we use a 3 year panel from two poor provinces in southern china to examine the nature of risks to which rural households are exposed and their ability to insure calorie consumption and spending of total consumption against idiosyncratic shocks to their income we find that idiosyncratic risks are indeed the main source of income variation in the sample consumption is better insured than total spending unlike total spending where full insurance is rejected in most cases calorie intake is completely insured for both land rich and land poor households in both provinces access to even modest amounts of land significantly enhances households ability to guard against total spending land rich households are much better insured against total spending than land poor households the results are robust across model specifications although generalized method of moments gmm estimations increase the magnitude of difference in total spending between the land rich and the land poor policies targeting poverty red

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

risk pooling through transfers in rural ethiopia abstract it is often assumed that transfers received from government nongovernment organizations ngos friends and relatives help rural households to pool risk in this article i investigate two functions of transfers in ethiopia risk pooling and income redistribution unlike most of the literature this article investigates not only whether but also how much risk pooling is achieved i find evidence that transfers from government ngos play a role in insuring covariant income shocks and evidence that transfers from both government ngos and friends relatives redistribute income however the contributions of these transfers to risk pooling and income redistribution are economically very limited moreover transfers from friends relatives do not play a role in risk sharing although transfers only play a minor role in risk pooling households in the study villages are found to be able to insure most of their idiosyncratic income shocks and part of their covariant income shocks

a simple test of consumption insurance are consumers effectively insured against idiosyncratic shocks to income or wealth either by formal institutions such as charities private insurance and government programs or by informal mechanisms such as gifts and loans from relatives friends and neighbors under full insurance consumption growth should be cross sectionally independent of idiosyncratic variables that are exogenous to consumers this proposition is tested by cross sectional regressions of consumption growth on a variety of exogenous variables full insurance is rejected for long illness and involuntary job loss but not for spells of unemployment loss of work due to strike and an involuntary move

health shocks and consumption smoothing in rural households does microcredit have a role to play abstract this paper estimates using a large panel data set from rural bangladesh the effects of health shocks on household consumption and how access to microcredit affects households response to such shocks households appear to be fairly well insured against health shocks our results suggest that households sell livestock in response to health shocks and short term insurance is therefore attained at a significant long term cost however microcredit has a significant mitigating effect households that have access to microcredit do not need to sell livestock in order to insure consumption microcredit organizations and microcredit therefore have an insurance role to play an aspect that has not been analyzed previously

one kind of freedom poverty dynamics in post apartheid south africa abstract a 1993 south african living standards survey documented the legacy of apartheid in the form high levels of inequality and human insecurity drawing on a 1998 re survey of households in the 1993 study this paper explores whether this legacy has been superseded or whether apartheid s end has been only one kind of freedom that has left households in a poverty trap from which they cannot escape after proposing a theoretically grounded dynamic poverty typology that distinguishes stochastic from structural poverty transitions the paper goes on to estimate that significant numbers of the south african poor are potentially trapped in a structural poverty trap and lack the means to escape poverty over time

group formation in risk sharing arrangements we study informal insurance within communities explicitly recognizing the possibility that subgroups of individuals may destabilize insurance arrangements among the larger group we therefore consider self enforcing risk sharing agreements that are robust not only to single person deviations but also to potential deviations by subgroups however such deviations must be credible in the sense that the subgroup must pass exactly the same test that we apply to the entire group it must itself employ some self enforcing risk sharing agreement we observe that the stability of subgroups is inimical to the stability of the group as a whole two surprising consequences of this analysis are that stable groups have uniformly bounded size a result in sharp contrast to the individual deviation problem and that the degree of risk sharing in a community is generally non monotonic in the level of uncertainty or need for insurance in the community

directed giving evidence from an inter household transfer experiment abstract we investigate the determinants of giving in a lab in the field experiment with large stakes study participants in urban mozambique play dictator games where their counterpart is the closest person to them outside their household when given the option dictators do a large fraction of giving in kind in the form of goods rather than cash in addition they share more in total when they have the option of giving in kind compared to giving that can only be in cash qualitative post experiment responses suggest that this effect is driven by a desire to control how recipients use gifted resources standard economic determinants such as the rate of return to giving and the size of the endowment also affect giving but the effects of even large changes in these determinants are significantly smaller than the effect of the in kind option our results support theories of giving where the utility of givers depends on the composition not just the level of gift recipient expenditures and givers thus seek control over transferred resources

the potential of land rental markets in the process of economic development evidence from china abstract we develop a model of land leasing with agents characterized by unobserved heterogeneity in ability and presence of an off farm labor market in this case decentralized land rental may contribute to equity and efficiency goals and may have several advantages over administrative reallocation the extent to which this is true empirically is explored using data from three of china s poorest provinces land rental markets and administrative reallocation reallocate land to those with lower endowments but the former are more effective in doing so and have a bigger productivity enhancing effect information on hypothetical market participation suggests that reducing transaction costs in land rental markets could help to realize significant additional productivity gains

identifying vulnerability to poverty a critical survey in the economic literature on poverty various methods have been proposed for measuring a phenomenon known as vulnerability however after more than a quarter century of research no consensus has been reached on how to identify such vulnerable individuals within a given population some misunderstandings have also arisen from the overlapping of other closely related concepts such as the expectation of being poor expected poverty multi period poverty and risk exposure this paper offers a detailed conceptual discussion on vulnerability to poverty and its related elements reviewing a wide range of identifying criteria provided in the literature it is found that according to the state of the art in this field of research two key elements stand out in identifying vulnerable individuals an expected well being below the poverty line and a relevant risk of falling into poverty due to downside deviation from a reference level of well being the traditional classification of vulnerability approaches has been updated into four groups i those that stress the element of exposure to risk ii those that emphasize the element of expected poverty iii those that define vulnerability through a utility gap and iv those that are supported by a mean risk dominance criterion

are the poor less well insured evidence on vulnerability to income risk in rural china the authors test how well consumption is insured against income risk in a panel of sampled households in rural china they estimate the risk insurance models by generalized method of moments treating income and household size as endogenous insurance exists for all wealth groups although the hypothesis of perfect insurance is universally rejected those in the poorest wealth decile are the least well insured with 40 percent of an income shock being passed on to current consumption by contrast consumption by the richest third of households is protected from almost 90 percent of an income shock the extent of insurance in a given wealth stratum varies little between poor and nonpoor areas

seasonality of income and poverty in bangladesh abstract seasonal food deprivation in bangladesh locally known as monga sometimes rises to the level of famine during the pre harvest period of aman rice an analysis of household income and expenditure survey data shows that income and consumption are lower during monga than in other seasons and that seasonal income greatly influences seasonal consumption econometric estimates reject the hypothesis of perfect consumption smoothing in the northwestern region of greater rangpur rural households suffer disproportionately from monga seasonal differences in poverty across regions are due mainly to differences in household specific seasonality of income and consumption income diversification explains the lower incidence of income seasonality observed in non rangpur regions to contain seasonal hunger in greater rangpur public policies should promote rural income diversification together with seasonal migration a flexible microfinance scheme that provides both production and consumption loans on flexible repayment terms could help diversify income and reduce seasonality of income and poverty

when faced with income and asset shocks do poor rural households in vietnam smooth food consumption or assets abstractvietnamese rural households are exposed to severe covariate and idiosyncratic shocks however these households are remarkably resilient and have steadily increased real income and consumption over the survey period 2006 to 2012 to explain household strategies to cope with shocks we test three theoretical models the permanent income hypothesis pih complete market hypothesis cmh and asset smoothing theory ast there is support for ast as households smooth productive assets rather than consumption and for cmh as households smooth consumption against idiosyncratic but not covariate shocks there is no support for pih

livelihoods and chronic poverty in semi arid zimbabwe abstract remoteness and geographic natural physical human and social capital are contrasted with social and political exclusion in explaining persistent rural poverty we found that persistent poverty was strongly associated with the structural poverty of zimbabwe s semi arid communal areas relative urban proximity assisted income diversification and improvement in a very poor socially and politically excluded area less excluded but remote areas remained poor but not as poor as the excluded population livelihoods changed and diversified more in the nonremote area speeding poverty reduction as measured by an index of perceived change we conclude with what policy options and sequence might support the inclusion of chronically poor people

are rainfed agricultural households insured evidence from five villages in vidarbha india there are several studies on risk and insurance in village economies in the developing world however there is a lack of evidence for recent decades in spite of profound changes including structural transformation and widespread market liberalization in most regions in this paper i use primary panel data from five rainfed villages in a high risk region of india and find evidence of considerable exposure as well as vulnerability to idiosyncratic and covariate risks further there is significant wealth differentiated heterogeneity in vulnerability the findings help identify the scope of public policy in improving risk management in rainfed agriculture

risk sharing from international factor income explaining cross country differences access to world capital markets and net investment income flows between countries help protect national income from country specific output shocks i empirically study what factors explain cross country differences in the extent of risk sharing from international factor income an index of investor protection is the leading causal variable for the estimated amount of risk sharing over the 1985 to 2004 period improving investor protection in russia to denmark s level implies five times larger risk sharing compared to the sample average these results indicate one possible way to reap large potential benefits from international risk sharing

the impact of the gatt agreement on eu fruit and vegetable policy abstract this paper examines the eu s plans for implementing the uruguay round gatt agreement on agriculture with respect to fresh fruits and vegetables it considers the import access export subsidy and domestic support commitments in particular the eu has decided to retain a minimum import price regime for fresh fruits and vegetables the new entry price system displacing the old reference price system is to apply on a consignment basis the entry price and reference price systems are compared and some conclusions drawn about the likely impact of entry prices on potential third country suppliers of the eu market