Consumption smoothing and the welfare consequences of social insurance in developing economies

Abstract

Studies of risk in developing economies have focused on consumption fluctuations as a measure of the value of insurance. A common view in the literature is that the welfare costs of risk and benefits of social insurance are small if income shocks do not cause large consumption fluctuations. We present a simple model showing that this conclusion is incorrect if the consumption path is smooth because individuals are highly risk averse. Hence, social safety nets could be valuable in low-income economies even when consumption is not very sensitive to shocks. © 2006 Elsevier B.V. All rights reserved.

1 Figure or Table

Statistics

051015'05'06'07'08'09'10'11'12'13'14'15'16'17
Citations per Year

61 Citations

Semantic Scholar estimates that this publication has 61 citations based on the available data.

See our FAQ for additional information.

Cite this paper

@inproceedings{Chetty2006ConsumptionSA, title={Consumption smoothing and the welfare consequences of social insurance in developing economies}, author={Raj Chetty and Adam Looney}, year={2006} }