Insurance Against Poverty
Poor people in developing countries are often affected by droughts, floods, illness, crop failure, job loss, and economic downturns. Much of their energy goes into coping with these shocks and into day-to-day survival. While insurance and credit markets, combined with widespread social security, provide an important cushion against poverty in rich countries, the need for immediate survival may lock the poor into persistent poverty in developing countries. The poor in developing countries do have informal mechanisms to cope with risk and misfortune. These are based on income diversification, risk avoidance, self-insurance by saving together with family, and community-based mutual assistance. Nevertheless, the scope of these mechanisms remains limited. Repeated individual-specific shocks such as illness or pests, or covariate risks associated with drought, flood, or recession, undermine the ability of individuals and their families to cope with risk.
Table of contents
'The volume begins with a very informative and well-thought-out review essay on risk and insurance by Dercon himself. This overview would be a useful addition to syllabi for advanced undergraduate or graduate development economics courses and to anyone wanting to get up to speed on the vast literature devoted to the topic. More generally, the essays in this volume will probably be most useful to scholars interested in a particular topic or in evidence and information for a particular country.' - Anna Paulson, Federal Reserve Bank of Chicago, Economic Development and Cultural Change, 55: 625–627, April 2007
'To conclude, this book provides a set of useful answers on crucial policy questions and deserves wide reading. It also points to the potential for a rich agenda of research questions for development economists to address.' - Flore Gubert, IRD, DIAL, Paris, Journal of African Economies, 16 (1): 172–175, September 2006