Understanding the impact of idiosyncratic shocks on farm productivity and household asset building and protection in Ghana, Ethiopia and Bangladesh
Most recent research on the impact of risk and vulnerability on poor households has focused on
covariate shocks such as those associated with weather, prices or macroeconomic policy reforms.
Unlike covariate shocks, which typically require a coordinated external response, householdspecific
or “idiosyncratic” shocks can, in principle, be effectively managed locally.
New
evidence that idiosyncratic risk dominates covariate risk in rural Africa and Asia indicates the
potential contribution of improved local risk management to household asset accumulation,
productivity growth and poverty reduction in developing countries.
Our proposed work will
focus on the impact of idiosyncratic risk on the dynamics of household well-being and
productivity. Ex ante, who trades off expected asset and productivity growth for reduced
exposure to idiosyncratic risk? Ex post, what determines the impact of such shocks on
households? What formal and informal institutions mediate those experiences?
The research
aims to clarify what existing mechanisms help households through episodes of adverse
idiosyncratic shocks, what gaps in coverage exist, and how different interventions affect
insurance against idiosyncratic risk and its dynamic effects on rural households’ asset holdings,
productivity and well-being in Bangladesh, Ethiopia and Ghana. The panel data sets on
agricultural households that we propose extending and using all have paid significant attention to
gender and social networks, have detailed risk and shock histories, and thus permit us to examine
gender-differentiated idiosyncratic risk and access to insurance mechanisms.
