Abstract
This paper explores the extent of consumption smoothing between 1981 and 1985 in rural Burkina Faso. In particular, we examine the extent to which livestock, grain storage and inter-household transfers are used to smooth consumption against income risk. The survey coincided with a period of severe drought, so the results provide direct evidence on the effectiveness of these various insurance mechanisms when they are the most needed. We find evidence of little consumption smoothing. In particular, there is almost no risk sharing, and households rely almost exclusively on self-insurance in the form of adjustments to grain stocks to smooth out consumption. The outcome, however, is far from complete smoothing. Hence the main risk-coping strategies which are hypothesized in the literature (risk sharing and the use of assets as buffer stocks) were not effective during the survey period.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 413-446 |
| Number of pages | 34 |
| Journal | Journal of Development Economics |
| Volume | 79 |
| Issue number | 2 |
| DOIs | |
| State | Published - Apr 2006 |
Funding
Harounan Kazianga received financial and technical support from the Economic Growth Center, Yale University and the Rockefeller Foundation Grant for Postdoctoral Research on the Economics of the Family in Low Income Countries. Udry acknowledges support from the Pew Charitable Trusts and the John D. and Catherine T. MacArthur Foundation. We are grateful to the editor, a referee, and Stefan Dercon and Marcel Fafchamps for very helpful comments.
Keywords
- Consumption smoothing
- Livestock
- Permanent income hypothesis
- Precautionary saving
- Risk sharing
ASJC Scopus subject areas
- Development
- Economics and Econometrics