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Idiosyncratic shocks, risk management and welfare dynamics in rural Ghana

Published by:
Publication date
Number of Pages
Type of Publication:
Focus Region:
Sub-Saharan Africa
Focus Topic:
Climate / Weather / Environment
Type of Risk:
Natural disasters
Type of Risk Managment Option:
Risk coping
Risk reduction/mitigation
Felix Naschold, Thomas Walker, Christopher B. Barrett, Robert Osei

Identifying who moves in and out of poverty over time has been the focus of a growing literature on household level poverty dynamics. A central theme of this literature has been the role of shocks and their impact on households ex ante and ex post risk management strategies. Shocks and strategies to mitigate their impact affect household level welfare dynamics. Success or failure to prevent and to deal with shocks determines whether households are able to escape and remain out of poverty or whether they continue to be or become poor as a result of adverse events. In turn, this success and failure is determined by households ability to access effective insurance mechanisms, both formal and informal. The more effective and accessible these mechanisms are the greater is the chance to recover from negative shocks and to improve well-being over time. Conversely, households with limited access to any type of insurance mechanism will find it harder to weather shocks and avoid chronic poverty.