Income Shocks, Coping Strategies, and Consumption Smoothing. An Application to Indonesian Data

Gabriella Berloffa and Francesca Modena

No 901, Department of Economics Working Papers from Department of Economics, University of Trento, Italia

Abstract: Using the Indonesian Family Life Survey, this study investigates whether Indonesian farmers respond differently to income shocks (crop loss) depending on the level of their asset ownership, and whether their responses are aimed at preserving consumption levels or at accumulating assets. We consider a framework in which assets contribute directly to the income generation process. In this context the need to accumulate assets to ensure future income may lead poor farmers (those with a low level of productive assets) to behave quite differently in terms of both their responses to shocks and their consumption decisions. For them transitory shocks may have long term consequences when the income loss leads to changes in their asset investment decisions. Our results suggest that while non-poor farmers smooth consumption relative to income, poor households use labor supply to compensate the income loss and, on average, they save half of this extra income. These results confirm the importance of savings for poor households, and highlight a crucial role for policies that support savings or, more precisely, the accumulation of productive assets.

Keywords: income shocks; consumption smoothing; asset smoothing (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-dev, nep-mac and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.unitn.it/files/01_09_berloffa.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: Income shocks, coping strategies, and consumption smoothing: An application to Indonesian data (2013)
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: https://EconPapers.repec.org/RePEc:trn:utwpde:0901

Access Statistics for this paper

More papers in Department of Economics Working Papers from Department of Economics, University of Trento, Italia Contact information at EDIRC.
Bibliographic data for series maintained by Luciano Andreozzi ().