Being prepared for unexpected events can help prevent poverty

Economic shocks and other unexpected events, such as family illness or crop failure, can cause poor households to fall deeper into poverty. To cope with such crises, households may cut down on non-food consumption in order to maintain their usual levels of food intake. A better understanding of how poor households are affected by, and cope with, unexpected events can help in the design of more appropriate social protection measures.

Unexpected events can have a negative impact on household incomes. Households may be less vulnerable to poverty if their food and non-food consumption can be protected in these circumstances. Research from International Food Policy Research Institute, USA, draws on five case studies: Bangladesh, Ethiopia, Mali, Mexico and Russia to examine the extent to which households are able to maintain their normal levels of consumption when they face unexpected events and sudden changes to income. To measure the extent to which normal levels of consumption are protected, the researchers compare changes in income and consumption levels to see if they vary together: for example, do households consume less when incomes fall? Comparison is made between changes in food and non-food consumption.

The research looks at household responses to a range of unexpected events: changes to wages and employment, loss of livestock, damage to crops and illness. It also examines the strategies that can be used to reduce the impact of sudden changes in income. Families, communities and the state can all provide protection: for example in the form of remittances from relatives or government grants and support. Households may also sell assets, find extra employment, take out loans and cultivate land in order to overcome problems and run their households normally.

The research finds that:

• Unexpected crises did not cause households to reduce their food intake (except in urban Russia).
• Households appear to cut-down on their non-food consumption to be able to maintain their normal food consumption.
• Households are more likely to seek or get support from their communities for their food needs rather than non-food items.
• Households that are chronically poor (i.e. poor for long periods of time) appear to be used to finding ways of maintaining their food intake, including during times of crisis.
• Richer households are more able than poorer ones to protect themselves as they have a wider range of coping strategies available to them (strategies that rely on initial wealth such as selling assets or taking out loans).

Households that are able to protect their consumption from the impact of unexpected crises will be less vulnerable to poverty. Given that poorer households have fewer of their own resources to draw on during difficult times, the researchers conclude that:

• Government grants and other support programmes may be more effective in helping poorer households.
• Social safety net programmes (such as cash transfers and subsidies) could aim at helping not only those households that are currently poor, but also those that are vulnerable to becoming poor.
• Identifying households that are less able to maintain their normal levels of total or food consumption may be useful.
• Helping households to plan for and manage difficult situations could help in reducing chronic and transient poverty.

 

Source(s):
‘Consumption Insurance and Vulnerability to Poverty: A Synthesis of the Evidence from Bangladesh, Ethiopia, Mali, Mexico and Russia’, The European Journal of Development Research 17 (1), pages 24-58, by Emmanuel Skoufias and Agnes Quisumbing, 2005

Funded by: The World Bank

id21 Research Highlight: 24 March 2006

Further Information:
Emmanuel Skoufias
The World Bank
LCSPP (18-113)
1818 H Street NW
Washington DC 20433
USA

Tel: +1 202 4587539
Fax: +1 202 5220054
Contact the contributor: eskoufias@worldbank.org

The World Bank

Agnes Quisumbing
International Food Policy Research Institute
2033 K Street NW
Washington DC 20006-1002
USA

Tel: +1 202 8625600
Fax: +1 202 4674439
Contact the contributor: a.quisumbing@cgiar.org

International Food Policy Research Institute

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