The costs of consumption smoothing: less schooling and less nutrition

Abstract

Using novel microdata, we explore lifecycle consumption in Sub-Saharan Africa. We find that households' ability to smooth consumption over the lifecycle is large, particularly, in rural areas. Consumption in old age is sustained by shifting to self-farmed staple food, as opposed to traditional savings mechanisms or food gifts. This smoothing strategy indicates two important costs. The first cost is a loss of human capital as children seem to be diverted away from school and into producing self-farmed food. Second, a diet largely concentrated in staple food (e.g., maize in Malawi) in old age results in a loss of nutritional quality for households headed by the elderly.

Information Asymmetry and Insurance in Africa

“…In the light of the above, the findings can be elicited with the notion of informal finance in accordance with the extant literature on the subject (Ligon et al, 2002;Dupas & Robinson, 2013;De Magalhaes & Santaeulalia 2018;De Magalhaes et al, 2019). In essence, clarifying a principal distinction between other insurance schemes (e.g.…”

Insurance and inequality in Sub‐Saharan Africa: policy thresholds

“…Hence, the results that life insurance increases inequality is broadly consistent with studies supporting the perspective that life insurance is used by the rich to accumulate assets (De Magalhaes & Santaeulalia 2018;Dupas & Robinson, 2018) and, by extension, ceteris paribus, the accumulation of more wealth by the rich naturally increases income inequality. Moreover, the findings that non-life insurance decreases inequality is traceable to perspective of non-life insurance smoothing consumption over the lifecycle (De Magalhaes et al, 2019). This clarification on non-life insurance should also be understood in the perspective that since most of the sampled countries are poor countries, informal forms of savings or insurance are quite substantial (Carroll, 1997;Kaplan & Violante, 2010) even to consumption and income distributions in such poor economies (Ligon et al, 2002).…”

“…The findings can be elucidated with the concept informal insurance in the light of attendant literature (Ligon et al, 2002;Dupas & Robinson, 2013;De Magalhaes & Santaeulalia 2018;De Magalhaes et al, 2019). Accordingly, understanding the main difference between life insurance and other insurance schemes (e.g.…”

Information Asymmetry and Insurance in Africa

“…The explanation is consistent with the perspective that the poor elements of society rely for the most part on non-life insurance schemes and hence, need to rely less on information sharing offices compared to the rich elements of society who use both life and non-life insurance services. Accordingly, the poor depend more on non-life insurance schemes because they help smoothen consumption through the life cycle (De Magalhaes et al, 2019). Moreover, this perspective on non-life insurance is worthwhile in clarifying the findings because informal insurance and savings characterise most of the sampled countries which are comparatively poor nations (Carroll, 1997;Ligon et al, 2002;Kaplan & Violante, 2010).…”