Insurance Against Poverty

by Dercon, Stefan

• ISBN13: 9780199276837
• ISBN10: 0199276838
• Format: Hardcover
• Copyright: 2005-01-27
• Publisher: Oxford University Press

Summary

Poor people in developing countries are often affected by droughts, floods, illness, crop failure, job loss, and economic downturns. Much of their energy goes into coping with these shocks and into day-to-day survival. While insurance and credit markets, combined with widespread socialsecurity, provide an important cushion against poverty in rich countries, the need for immediate survival may lock the poor into persistent poverty in developing countries.The poor in developing countries do have informal mechanisms to cope with risk and misfortune. These are based on income diversification, risk avoidance, self-insurance by saving together with family, and community-based mutual assistance. Nevertheless, the scope of these mechanisms remains limited.Repeated individual-specific shocks such as illness or pests, or covariate risks associated with drought, flood, or recession, undermine the ability of individuals and their families to cope with risk.We now know much more about vulnerability to risk and how poor people cope. Even more importantly, we have learned much about the large long-term consequences of these risks, which condemns many to persistent poverty and excludes them from economic growth. But there is much that can be done. Themicro-level studies that underpin this book offer new insights on how effective public action could be more effective in protecting the vulnerable against persistent poverty. Policy should focus on providing a comprehensive menu of ex-ante and post-crisis protection mechanisms, including new formsof insurance, savings, safety nets, and the means to strengthen the poor's asset base. Local communities have a big role to play: public funds should not be used to replace indigenous community-based support networks; rather they should be used to build on the strengths of these networks to ensurebroader and more effective protection.With numerous thematic chapters and case studies of both best practice and of failure, from a mix of low-income and middle-income countries across the developing world, this book evaluates alternatives in widening insurance and protection provision, and makes an important contribution to the topicalfield of insurance and risk.

Author Biography

Stefan Dercon is a University Lecturer at the University of Oxford, and has been Professor in Development Economics at the Katholieke Universiteit Leuven, Belgium, a Research Officer at the centre of the Study of African Economies, a Research Fellow at Nuffield College, Oxford, and a Visiting Professor at the University of Addis Ababa, Ethiopia.

Table of Contents

List of Tables	viii
List of Figures	xi
List of Abbreviations	xiii
Notes on Contributors	xiv
Foreword	xvii
Acknowledgements	xviii
Overview	1	(8)
Stefan Dercon
Part I. Risk and Insurance: Evidence
Risk, Insurance, and Poverty: A Review	9	(29)
Stefan Dercon
Consumption Smoothing Across Space: Testing Theories of Risk-Sharing in the ICRISAT Study Region of South India	38	(21)
Jonathan Morduch
Part II. Risk and Poverty: Theory
The Two Poverties	59	(17)
Abhijit V. Banerjee
Inequality and Risk	76	(31)
Marcel Fafchamps
Part III. Risk and Poverty: Persistence
Household Income Dynamics in Rural China	107	(17)
Jyotsna Jalan
Martin Ravallion
Health, Shocks, and Poverty Persistence	124	(13)
Stefan Dercon
John Hoddinott
The Macroeconomic Repercussions of Agricultural Shocks and their Implications for Insurance	137	(18)
Paul Collier
Part IV. Identifying the Vulnerable
Measuring Vulnerability to Poverty	155	(21)
Gisele Kamanou
Jonathan Morduch
Targeting and Informal Insurance	176	(21)
Ethan Ligon
Part V. Risk and Social Institutions
Risk-Sharing and Endogenous Network Formation	197	(20)
Joachim De Weerdt
Is a Friend in Need a Friend Indeed? Inclusion and Exclusion in Mutual Insurance Networks in Southern Ghana	217	(30)
Markus Goldstein
Alain de Janvry
Elisabeth Sadoulet
The Gradual Erosion of the Social Security Function of Customary Land Tenure Arrangements in Lineage-based Societies	247	(34)
Jean-Philippe Platteau
Part VI. Safety Nets and Social Institutions
Do Public Transfers Crowd Out Private Transfers?: Evidence from a Randomized Experiment in Mexico	281	(24)
Pedro Albarran
Orazio P. Attanasio
Food Aid and Informal Insurance	305	(25)
Stefan Dercon
Pramila Krishnan
Why is there Not More Financial Intermediation in Developing Countries?	330	(31)
Jonathan Conning
Michael Kevane
Part VII. Developing Better Protection for the Poor
Can Food-for-Work Programmes Reduce Vulnerability?	361	(26)
Christopher B. Barrett
Stein Holden
Daniel C. Clay
Learning from Visa®? Incorporating Insurance Provisions in Microfinance Contracts	387	(35)
Loic Sadoulet
Can Financial Markets be Tapped to Help Poor People Cope with Weather Risks?	422	(17)
Jerry Skees
Panos Varangis
Donald F. Larson
Paul Siegel
Part VIII. Conclusion
Risk, Poverty, and Public Action	439	(12)
Stefan Dercon
Index	451