 Risk insurance in a transition economyDelphine Irac and Camelia Minoiu The Economics of Transition, 2007, vol. 15, issue 1, 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. Date: 2007 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:etrans:v:15:y:2007:i:1:p:153-173 Ordering information: This journal article can be ordered from Access Statistics for this article The Economics of Transition is currently edited by Philippe Aghion and Wendy Carlin More articles in The Economics of Transition from The European Bank for Reconstruction and Development Contact information at EDIRC. |
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