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Idiosyncratic Shocks Impacting Rural Households: Ghana Case Study

This study explores idiosyncratic shocks affecting rural households in Ghana, emphasizing the significance of managing risks and leveraging social networks for coping strategies. Preliminary results reveal challenges and coping mechanisms related to household assets, income dynamics, and community-specific shocks. Insights on education, occupation, consumption, and coping strategies shed light on the welfare dynamics. The research aims to enhance understanding of shock effects and mitigating mechanisms for improved policy interventions.

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Idiosyncratic Shocks Impacting Rural Households: Ghana Case Study

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  1. Idiosyncratic Shocks and Welfare Dynamics in Akwapim South District :Some Preliminary Results By Andrew Adjei-Holmes (ISSER, UoG) Ernest Aryeetey (ISSER, UoG) Christopher Barrett (Cornell University) Robert Darko Osei (ISSER, UoG) Thomas Walker (Cornell University) Presented at ISSER, 15th July, 2010

  2. Structure of Presentation • An introduction • Main Research Questions • Some Preliminary Results • Some concluding remarks

  3. An introduction • Idiosyncratic risks (shocks) tends to dominate covariate risks in rural incomes in Africa and Asia • They can affect household incomes directly – e.g. loss of job • Such shocks affect rural incomes through asset accumulation and productivity – funeral rites • In Ghana, such shocks are widespread and are important determinants of current incomes of rural households • Improving the management of such risks will improve the rate of asset accumulation by households – and therefore improve household incomes

  4. The ability of households to cope with such shocks depends on among other factors, how socially connected households are • Evidence suggests that shocks have persistent effects on asset dynamics of households that are least connected • There are different mechanisms that help households deal with such shocks – • Examples in Ghana include hometown associations (and others) and other informal insurance mechanisms such as funeral contributions.

  5. The aim of the project is to • study the nature of idiosyncratic shocks that affects households, • The effects of these shocks on households • The nature and type of mechanisms that help mitigate the effects of these shocks

  6. Some Preliminary Results Age Distribution of Households

  7. Highest school level attended (per cent of respondents) • Damang seems to trail the other villages in terms of senior high school attainment • Junior school attainment is higher than the national average – lagged effects of capitation grant?

  8. Reasons for leaving School (per cent of respondents) • The main reason why people would have left school is because they could not afford it • In Pokrom and Oboadaka people left to help parents – Is there a Pineapple story?

  9. Source of Drinking Water for Household

  10. Occupation (per cent of respondents)

  11. Men are more likely to be employed as farmers generally – • However this is not true for Konkonuru • Women are more likely to be a shop attendant or trader • The Nsawam effect is quite evident in Damang – more taxi and trotro drivers • There are also signs of the Aburi effect on Konkonuru

  12. Consumption by Households (Monthly GHC) • On average individuals in these communities are very close to the poverty line

  13. Household Incomes (Over Past 2 months - GHc) • Income seems to be higher in the communities that do less farming of pineapples

  14. Mean Transfers – Given and received by age • Two interesting observations here • Net transfers received is higher for older people (pensioners) • Generally households are net receivers – consistent with consumption > incomes

  15. Household Asset- Mean GHC

  16. Financial assets seem to dominate except for Pokrom where durables are quite important • Maybe related to history of pineapple business in pokrom • Pokrom still dominates in terms of total assets • Possibly driven by outliers

  17. Shocks to the Household - Damang

  18. Shocks to the Household - Konkonuru

  19. Shocks to the Household - Oboadaka

  20. Shocks to the Household - Pokrom

  21. Coping Strategies of Households – Funeral expenses shock

  22. Shocks • In value terms different shocks ranks differently in different communities • In terms of the number of times these shocks occur, funerals and death of hh member or relative is important – true across communities • Coping Strategies (Funerals) • Majority will not have done anything – could mean ‘most of the above’ • Getting help from others, taking loans from informal sources remain quite important • Oboadaka and Pokrom, selling of assets is important

  23. Conclusion • Most households in these communities are poor • Idiosyncratic shocks are significant and wide-ranging • Value of shocks sometimes exceed value of consumption • Selling of assets remain an important strategy for coping with these shocks • Other strategies rely on social networks – how connected the households are

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