Consumption smoothing and the welfare consequences of social insurance in developing economies
By: Raj Chetty, Adam Looney.
Contributors: Looney, Adam.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11709; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11709.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Social security -- Economic aspects -- Developing countries.; Consumption (Economics) -- Developing countries.
Description: "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.  Empirical studies find that many households in developing countries rely on inefficient methods to smooth consumption, suggesting that they are indeed quite risk averse.  Hence, social safety nets may be valuable in low-income economies even when consumption is not very sensitive to shocks"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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