Risk insurance in a transition economy

Delphine M. Irac and Camelia Minoiu ()

The Economics of Transition, 2007, vol. 15, issue 1, pages 153-173

Abstract: The hypothesis of Pareto-optimal risk-sharing is tested in a transition economy using a new dataset of a representative sample of 364 rural households from Romania. Income shocks are identified as instances of adverse weather, crop failure, animal diseases, illness, and unemployment spells. Despite limited participation of Romanian rural households in formal insurance and credit markets, we fail to reject the hypothesis of full insurance of total non-durable consumption and its components. Survey responses indicate that the main channels of consumption smoothing are self-insurance (for adverse weather, crop failure and animal diseases), public transfers (for unemployment spells, maternity and childcare), and to a lesser extent, family ties. We find that adverse weather is associated with higher growth rates of non-food expenditures. Furthermore, richer households are better able to cope with crop failure than poorer households. An alternative explanation to our not rejecting the hypothesis of full insurance is that some shocks to consumption (such as illness) play the role of preference shifters of the utility function. Copyright (c) 2007 The Authors Journal compilation (c) 2007 The European Bank for Reconstruction and Development.

Date: 2007
View citations in EconPapers

Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0351.2007.00275.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bla:etrans:v:15:y:2007:i:1:p:153-173

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0967-0750

Access Statistics for this article

The Economics of Transition is edited by Philippe Aghion and Wendy Carlin

More articles in The Economics of Transition from The European Bank for Reconstruction and Development
Series data maintained by Christopher F. Baum ().