Household shocks and consumption smoothing: Evidence from Northern Bangladesh
Poor households in rural Bangladesh often face concurring idiosyncratic and aggregate shocks, which have adverse impacts on their income and consumption. In this study, we investigate the transmission channels, coping responses, and economic consequences of different shocks including idiosyncratic a...
| Autores principales: | , |
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| Formato: | Journal Article |
| Lenguaje: | Inglés |
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Project MUSE
2022
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| Acceso en línea: | https://hdl.handle.net/10568/141347 |
| _version_ | 1855543690814029824 |
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| author | Bakhtiar, M. Mehrab Rabbani, Atonu |
| author_browse | Bakhtiar, M. Mehrab Rabbani, Atonu |
| author_facet | Bakhtiar, M. Mehrab Rabbani, Atonu |
| author_sort | Bakhtiar, M. Mehrab |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | Poor households in rural Bangladesh often face concurring idiosyncratic and aggregate shocks, which have adverse impacts on their income and consumption. In this study, we investigate the transmission channels, coping responses, and economic consequences of different shocks including idiosyncratic adverse health events and aggregate agricultural productivity shocks. We use a balanced panel data of 5,655 rural households–interviewed every year between 2010 and 2013–in northern Bangladesh. We estimate the effects of adverse health shocks on the consumption levels of poor households in a multi-shock framework. We take advantage of the panel data and use fixed effect models to control for unobserved household-level confounders and potential endogeneity. We further examine effects of shocks to agricultural wages on consumption using rainfall as an instrument. We further carry out a number of robustness checks to understand how sensitive our models are to different alternate specifications. Results indicate that households smooth their consumption after experiencing adverse health shocks, with and without the parallel incidence of other types of shocks. Consumption smoothing occurs despite households experiencing a significant decrease of wage income, which appears to be driven by an increase in informal loans from money lenders and households' social networks. To evaluate the effect of a different type of income shock on consumption, we use rainfall as an exogenous instrument for agricultural income. Results indicate that while higher rainfall leads to a significant increase in agricultural income, it does not translate to higher food expenditure for households. Together, these findings offer suggestive evidence that, in this setting, households appear to smooth food consumption in the face of income shocks. Poor households rely on formal and informal, potentially costly channels and exploit existing social networks to insure themselves against adverse shocks. The findings highlight the importance of developing a better framework to evaluate and implement more equitable social safety net policies. |
| format | Journal Article |
| id | CGSpace141347 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2022 |
| publishDateRange | 2022 |
| publishDateSort | 2022 |
| publisher | Project MUSE |
| publisherStr | Project MUSE |
| record_format | dspace |
| spelling | CGSpace1413472025-10-26T13:02:11Z Household shocks and consumption smoothing: Evidence from Northern Bangladesh Bakhtiar, M. Mehrab Rabbani, Atonu income expenditure rainfall low income groups data loans social networks shock surveys health households farm income food productivity economic consequences consumers social safety nets rural areas Poor households in rural Bangladesh often face concurring idiosyncratic and aggregate shocks, which have adverse impacts on their income and consumption. In this study, we investigate the transmission channels, coping responses, and economic consequences of different shocks including idiosyncratic adverse health events and aggregate agricultural productivity shocks. We use a balanced panel data of 5,655 rural households–interviewed every year between 2010 and 2013–in northern Bangladesh. We estimate the effects of adverse health shocks on the consumption levels of poor households in a multi-shock framework. We take advantage of the panel data and use fixed effect models to control for unobserved household-level confounders and potential endogeneity. We further examine effects of shocks to agricultural wages on consumption using rainfall as an instrument. We further carry out a number of robustness checks to understand how sensitive our models are to different alternate specifications. Results indicate that households smooth their consumption after experiencing adverse health shocks, with and without the parallel incidence of other types of shocks. Consumption smoothing occurs despite households experiencing a significant decrease of wage income, which appears to be driven by an increase in informal loans from money lenders and households' social networks. To evaluate the effect of a different type of income shock on consumption, we use rainfall as an exogenous instrument for agricultural income. Results indicate that while higher rainfall leads to a significant increase in agricultural income, it does not translate to higher food expenditure for households. Together, these findings offer suggestive evidence that, in this setting, households appear to smooth food consumption in the face of income shocks. Poor households rely on formal and informal, potentially costly channels and exploit existing social networks to insure themselves against adverse shocks. The findings highlight the importance of developing a better framework to evaluate and implement more equitable social safety net policies. 2022-09 2024-04-12T13:37:44Z 2024-04-12T13:37:44Z Journal Article https://hdl.handle.net/10568/141347 en Limited Access Project MUSE Bakhtiar, M. Mehrab; and Rabbani, Atonu. 2022. Household shocks and consumption smoothing: Evidence from Northern Bangladesh. Journal of Developing Areas 56(4): 279-302. https://doi.org/10.1353/jda.2022.0077 |
| spellingShingle | income expenditure rainfall low income groups data loans social networks shock surveys health households farm income food productivity economic consequences consumers social safety nets rural areas Bakhtiar, M. Mehrab Rabbani, Atonu Household shocks and consumption smoothing: Evidence from Northern Bangladesh |
| title | Household shocks and consumption smoothing: Evidence from Northern Bangladesh |
| title_full | Household shocks and consumption smoothing: Evidence from Northern Bangladesh |
| title_fullStr | Household shocks and consumption smoothing: Evidence from Northern Bangladesh |
| title_full_unstemmed | Household shocks and consumption smoothing: Evidence from Northern Bangladesh |
| title_short | Household shocks and consumption smoothing: Evidence from Northern Bangladesh |
| title_sort | household shocks and consumption smoothing evidence from northern bangladesh |
| topic | income expenditure rainfall low income groups data loans social networks shock surveys health households farm income food productivity economic consequences consumers social safety nets rural areas |
| url | https://hdl.handle.net/10568/141347 |
| work_keys_str_mv | AT bakhtiarmmehrab householdshocksandconsumptionsmoothingevidencefromnorthernbangladesh AT rabbaniatonu householdshocksandconsumptionsmoothingevidencefromnorthernbangladesh |