Risk Pooling Through Transfers in Rural Ethiopia

Tinbergen Institute Discussion Paper No. 07-014/2

37 Pages Posted: 2 Feb 2007

See all articles by Lei Pan

Lei Pan

Vrije Universiteit Amsterdam, School of Business and Economics

Date Written: January 2007

Abstract

It is often assumed that transfers received from governments, non-government organizations (NGOs), friends and relatives help rural households to pool risk. In this paper I investigate two functions of transfers in Ethiopia: risk pooling and income redistribution. Unlike most of the literature this paper investigates not only whether but also how much risk pooling is achieved. I find evidence that transfers from governments/NGOs play a role in insuring covariant income shocks, (weak) evidence that transfers from friends/relatives insure idiosyncratic income shocks and evidence that transfers target the poor households. However, the contributions of transfers to risk pooling and income redistribution are economically very limited.

Keywords: Risk, Insurance, Income redistribution

JEL Classification: I38, O17

Suggested Citation

Pan, Lei, Risk Pooling Through Transfers in Rural Ethiopia (January 2007). Tinbergen Institute Discussion Paper No. 07-014/2, Available at SSRN: https://ssrn.com/abstract=960424 or http://dx.doi.org/10.2139/ssrn.960424

Lei Pan (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

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