Template-type: ReDif-Paper 1.0
Author-Name: Azomahou T.T. 
Author-Name: Yitbarek E. 
Author-workplace-name: UNU-MERIT
Title: Poverty persistence and informal risk management: Micro evidence from urban Ethiopia
Abstract:  Two factors that have received limited attention in poverty dynamic  studies are the role of risk in causing poverty mobility and attrition  bias. Controlling for the attrition bias, we study poverty dynamics in  urban Ethiopia with an emphasis on the effect of idiosyncratic shocks  and informal risk management strategies. We used a unique panel data  spanning a decade. Our results show the adverse impact of uninsured  idiosyncratic shocks on welfare. We find unemployment of household head  propels households to persistent poverty. We also observe poor  households using ineffective risk management strategies which have  negative consequences on welfare than their non-poor counterparts.  Further, we find strong poverty state dependence which is mainly driven  by households heterogeneity. The overall results of our study suggest  that public insurance programmes that support poor households during  bad times may improve welfare by providing consumption insurance.  Indeed, policies focusing on household heterogeneities such as exposure  to risk, lack of education, personal skills and capacities, could have  long lasting effects.
Keywords: Personal Finance, Measurement and Analysis of Poverty, Microeconomic Analyses of Economic Development 
Classification-JEL: D14, I32, O12
Series: UNU-MERIT Working Papers
Creation-Date: 2015
Number: 2015-006
File-URL: https://unu-merit.nl/publications/wppdf/2015/wp2015-006.pdf
File-Format: application/pdf
File-Size: 592112
Handle: RePEc:unm:unumer:2015006