Working Paper: NBER ID: w30143
Authors: Orazio Attanasio; Costas Meghir; Corina Mommaerts; Yu Zheng
Abstract: We consider risk sharing in rural China during its rapid economic transformation from the late 1980s through the late 2000s. We document an erosion of consumption insurance against both household-level idiosyncratic and village-level aggregate income shocks, and show that this decline is related to observable economic changes: the shift out of agriculture, the decline of publicly owned Township-and-Village Enterprises, and increased migrant work. Further evidence suggests that as these changes took place at the village level, higher levels of government failed to offset these effects through the tax-and-transfer system, leaving households more exposed to both idiosyncratic and village-aggregate risk.
Keywords: No keywords provided
JEL Codes: D12; E21; O12; P25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| household-level idiosyncratic shocks (D19) | decline of consumption insurance (G52) |
| village-level aggregate income shocks (E16) | decline of consumption insurance (G52) |
| shift from agriculture to wage employment (J43) | decline of consumption insurance (G52) |
| decline of township and village enterprises (P31) | decline of consumption insurance (G52) |
| government tax-and-transfer system (H29) | offsetting effects on consumption insurance (G52) |
| permanent income shocks (G59) | insurable within villages (G52) |
| transitory income shocks (J69) | insurable within villages (G52) |
| erosion of insurance (G52) | welfare cost (D69) |