<mark>specialized income strategy.</mark><sup>25</sup> <mark>As expected, within the two high income groups a higher share pursue such as strategy. In particular, among the</mark> _<mark>income rich & asset poor</mark>_ <mark>, 20% get most of their income from a single source. Specialization seems to be a strategy for moving out of income poverty for asset poor households.</mark> <mark>High income diversity is commonly viewed as part of a risk management (adaptive) strategy to deal with risk. The higher diversity found among the income poor should,</mark> _<mark>ceteris paribus,</mark>_ <mark>make them less sensitive to shocks. Yet, income diversity is only one aspect of vulnerability.</mark><sup>26</sup> <mark>A high diversity can also be viewed as large groups of households not having access to income</mark> from the most profitable activities, which would have helped them increase overall income and move above the poverty line.

# **5.2 Self-reported responses to shocks**<sup>**27**</sup>

The PEN data set contains detailed information on self-reported responses to any shocks that the household faced during the survey year. Collecting more products from forests and other natural habitats is one option, and we ask: _How important is increased harvesting of forest and other wild products as a coping strategy after a shock, and how does this strategy vary across households, and type and severity of the shock?_

## **5.2.1 Coping strategies across types of shocks**

Households were asked about how they coped with the shock, and could rank up to three responses in order of importance. We focus on the top-ranked response, unless otherwise stated, but discuss the full range of responses at the end of this section.

Figure 3 shows how households responded to the three main categories of shocks. We have included the “did nothing in particular” response. For shocks that have reduced income this could be interpreted that the household has lowered consumption and/or reduced savings. Overall, “did nothing” is the most common response (20%). The most frequently mentioned among the active coping response is to take on extra casual (wage) labor (15%) or use household savings (13%), followed by harvest/sell more agricultural products<sup>28</sup> (10%), and harvest more products from forest and other natural habitats (9%).<sup>29</sup> There is a large and interesting variation in the coping strategies across different types of shock. More wage work is the most common response after an income shock. Spending household savings is the most common one after a labor (including health) shock, which is not surprising as illness prevents the household member from taking up extra work. In almost half of the cases when households experienced an asset loss they did nothing in particular, probably because this might not involve an immediate income shortfall. Getting assistance from friends, relatives or an organization

> 25 To illustrate that degree of specialization implied, the following income composition would create a Herfindahl Index of 0.6: 77% of the income is earned from one activity, while the remaining 23% is spread equally over the six other income categories.

> 26 As noted by Dercon (2002), the degree of diversification is an incomplete measure of diversification. It does not take into account the magnitude of risk for the difference activities, not the covariance between income sources (e.g., in response to climate variability).

> 27 See also Wunder et al. (2014) for an analysis and discussion of the safety net function of forests products, also based on the PEN data.

> 28 This strategy might also entail reduced food consumption, e.g., sell more of food stored to cover cash expenses.

> 29 This category is the aggregate response of two codes in the questionnaire: “Harvest more forest products” and “Harvest more wild products not in the forest”.

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