Characterizing Income Shocks and their Transmission to Household Consumption

Purpose The purpose of this paper is to examine the effect of income shocks on household real consumption expenditure, taking into account the various informal coping strategies adopted by the households. Using Nigerian Household Panel Survey data for the year 2010/2011 and 2012/2013 respectively, and probit model estimation approach, the results suggest that idiosyncratic shocks have effect on household consumption expenditure and the informal insurance strategies play only limited roles in providing the needed insurance to households in the face of shocks. Also, the effect of shocks vary according to households characteristics, which depends on whether the household is headed by male or female and urban or rural dweller. Design/methodology/approach This paper explores the fixed effects and probit model estimation approach to examine the relationship between the effect of covariate and self-reported idiosyncratic shocks on household welfare. The study examines the effectiveness of the various informal coping measures adopted by households against shocks. Findings The results suggest that idiosyncratic shocks have been found to have little effect on real consumption expenditure and the informal insurance strategies play only limited roles in providing the much needed insurance to households in the face of shocks. Also, the effect of shocks vary according to households characteristics, whether the household is headed by male or female and urban or rural dweller is important. Originality/value The novelty of this essay is to investigate the relationship between variation in self-reported shocks to income across households and real consumption expenditure in Nigeria – a poor, risk-prone country – considering also, the ease with which households adopt the various risk-coping strategies, which help them in smoothing consumption over time.

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Farm Producers' Household Consumption and Individual Risk Behavior after Natural Disasters

Agricultural and Resource Economics Review ◽

10.1017/age.2021.2 ◽

2021 ◽

Vol 50 (1) ◽

pp. 127-149

Author(s):

Ahmad Zia Wahdat ◽

Michael A. Gunderson ◽

Jayson L. Lusk

Keyword(s):

Absolute Risk ◽

Risk Preferences ◽

Well Being ◽

Household Consumption ◽

Sample Survey ◽

Individual Risk ◽

Income Shocks ◽

Income Loss ◽

Business Decisions ◽

Income Shock

AbstractUnderstanding how farm household consumption responds to adverse income shocks can provide insight into household well-being and appropriate agricultural policy. Using a split-sample survey of Indiana specialty producers, where we randomly assign respondents to treatments that vary the size of a hypothetical income shock, we estimate the relationship between income loss and household consumption. Given that postdisaster producers' risk preferences are important for business decisions, we elicit producers' risk preferences. We find that food and miscellaneous expenses are the most sensitive to income losses. We also find evidence for decreasing absolute risk aversion among producers after the income loss shock.

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Transitory Income Shocks and Essential Household Consumption Expenditures in Rural Kenya

10.7176/jesd/10-12-04 ◽

2019 ◽

Keyword(s):

Household Consumption ◽

Income Shocks ◽

Consumption Expenditures ◽

Transitory Income ◽

Rural Kenya

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Did Household Consumption Become More Volatile?

The American Economic Review ◽

10.1257/aer.101.5.2248 ◽

2011 ◽

Vol 101 (5) ◽

pp. 2248-2270 ◽

Cited By ~ 40

Author(s):

Olga Gorbachev

Keyword(s):

Interest Rates ◽

Measurement Errors ◽

Family Income ◽

Household Consumption ◽

Income Shocks ◽

Income Volatility ◽

Access To Credit ◽

The Us ◽

Differential Increase ◽

Predictable Variation

I show that after accounting for predictable variation arising from movements in real interest rates, preferences and income shocks, liquidity constraints and measurement errors, volatility of household consumption in the US increased by 25 percent between 1970 and 2004. The increase was lower than that of volatility of family income. Nonwhite and those with less than 13 years of education, for whom there was no differential increase in income volatility, experienced a significantly larger increase in volatility of household consumption. Substantial differences in wealth and access to credit markets point to the main reason for this divide. JEL: D12, D14, E21, J15

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Sooner or later? The impact of child education on household consumption

Empirical Economics ◽

10.1007/s00181-021-02184-3 ◽

2022 ◽

Author(s):

Carmen Aina ◽

Daniela Sonedda

Keyword(s):

Household Consumption ◽

Permanent Income ◽

Income Shocks ◽

University Reform ◽

Exogenous Shock ◽

Durable Consumption ◽

Child Education ◽

The Impact ◽

Positive Effect ◽

Years Of Schooling

AbstractWe study the impact of one more year of child’s education on household (non-durable) consumption. We exploit an exogenous shock generated by a university reform in Italy in the early 2000s. We find that families responded in a way that is consistent with education as a production good. The higher child’s education produced household positive, permanent income innovations. Hence, family non-durable consumption increased. Our findings suggest that education can be an insurance device against adverse permanent income shocks. The 2001 reform not only positively affected offspring’s years of schooling, but it also had a positive effect to boost household consumption.

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