Shocks and their consequences across and within households in rural Zimbabwe

This brief looks at how households in Zimbabwe try to smooth consumption and assets. It looks at the empirical evidence on the churning of households in and out of poverty and the possibility that temporary shocks can have permanent consequences

The research examines the impact of shocks by levels of asset holdings and assesses the impact on individual welfare. In this way, we assess the validity of distinguishing between asset and consumption smoothing and provide insights into whether poverty dynamics assessed at the household level provide an adequate picture of the dynamics at the individual level.The findings speak to current issues in the study of poverty dynamics:

• drought shocks do cause some households to draw down assets, yet different households may indeed respond differently to income shocks depending on the level of their asset holding
• the term “consumption smoothing” seems too broad as it implies that all household members’ consumption may, or may not, be smoothed after a shock
• the preservation of physical assets by these Zimbabwean households led to a temporary reduction in women’s health and a (likely) permanent reduction in the human capital of children unlucky enough to be caught in the aftermath of the 1994/95 drought

The analysis reveals that:

• households with higher levels of asset holdings may choose to cope with a shock by selling some assets in order to buy food
• this decision does not necessarily carry with it a cost to the family’s future earnings or consumption
• it does not necessarily preclude the household’s ability to recover these assets at a later time
• the poorest families face a starker decision, with potentially more drastic consequences both in the immediate and long term
• without a “surplus” of livestock to sell, these families generally seem willing to hang onto their livestock even though this means they must endure short-term hunger
• such a strategy may also carry with it a long-term harmful effect for the most vulnerable members of the family, the youngest children