Household coping behavior and its contribution to resilience to global macroeconomic shocks in Vanuatu and Solomon Islands

Lachlan McDonald

Review of Development Economics, 2018, vol. 22, issue 4, e185-e201

Abstract: This paper examines the resilience of households in Vanuatu and Solomon Islands—two small island developing states in Melanesia renowned for their vulnerabilities—to the adverse effects of global macroeconomic shocks. The focus is on the spike in international food and fuel prices in 2008 and the subsequent shock to global demand, known as the Global Economic Crisis (GEC). Using a unique retrospective cross‐section survey, the results show that experience of these shocks was widespread across urban and rural areas. Households with more education, access to income‐generating activities—particularly in the informal sector—and greater wealth were best placed to withstand a deterioration in their well‐being, measured as a fall in self‐reported disposable income. Households also employed a variety of coping strategies in response to the shocks. Local food gardens and informal insurance are seen as key safety nets in times of stress, yet neither provided full insurance from the shocks. Some households, particularly in urban areas, employed harmful coping strategies, such as reducing spending on health, education, and food. While potentially effective in withstanding a temporary fall in disposable income, these responses are likely to weaken overall resilience and leave households vulnerable to future shocks.

Date: 2018
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