Consumption Smoothing and the Welfare Consequences of Social Insurance in Developing Economies
By Raj Chetty, Adam Looney. 2006
258 citations recorded by the source corpus.
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.
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Citations in the corpus
- The (hidden) costs of political instability: Evidence from Kenya's 2007 election crisis☆ (2012, unknown): “While these types of responses may be very costly, they will not show up in basic risk-coping tests which examine the responsiveness of consumption to income shocks (Morduch, 1995; Chetty and Looney, 2006).”
- The Effects of Unemployment Insurance Benefits: New Evidence and Interpretation (2016, unknown): “For example, Chetty and Looney (2006) document that while unemployment leads to similar reductions in consumption in the United States and Indonesia, the methods of consumption smoothing are very different.”
- Coping with shocks in rural Ethiopia (2013, background): “In the context of a formal test of consumption insurance, Chetty and Looney (2006) argue that insurability of consumption should be interpreted with caution and that it is important to consider what underlies such a result. To elaborate, drawing the conclusion that households are able to protect (cu”
- Social Protection for Enhanced Food Security in Sub-Saharan Africa (2012, background): “Risk-averse people living close to subsistence are more likely to cut spending, say by withdrawing children from school, than to increase spending by buying insurance (Chetty and Looney, 2005).”
- The Economic Origins of Conflict in Africa (2017, unknown): “5, we make the following points: (i) agents are unwilling to substitute food consumption intertemporally; (ii) in order to maintain food consumption in the wake of price shocks, therefore, agents must have access to savings, credit, or insurance; (iii) absent these mechanisms, agents must resort to ”
- Are Female-Headed Households More Food Insecure? Evidence from Bangladesh (2010, unknown): “(Buvinić & Rao Gupta, 1997, p. 268; Chetty & Looney, 2006, p. 2352).”