Household Consumption Volatility and Poverty Risk: Case Studies from South Africa and Tanzania

Author/Editor:

Matthieu Bellon ; Carlo Pizzinelli ; Roberto Perrelli

Publication Date:

March 6, 2020

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Economic volatility remains a fact of life in Sub Saharan Africa (SSA). Household-level shocks create large consumption fluctuations, raising the incidence of poverty. Drawing on micro-level data from South Africa and Tanzania, we examine the vulnerability to shocks across household types (e.g. by education, ethnic group, and economic activity) and we quantify the impact that reducing consumption volatility would have on aggregate poverty. We then discuss coverage of consumption insurance mechanisms, including financial access and transfers. Country characteristics crucially determine which household-level shocks are most prevalent and which consumption-smoothing mechanisms are available. In Tanzania, agricultural shocks are an important source of consumption risk as two thirds of households are involved in some level of agricultural production. For South Africa, we focus on labor market risk proxied by transitions from formal employment to informal work or unemployment. We find that access to credit, when available, and government transfers can effectively mitigate labor market shocks.

Series:

Working Paper No. 20/51

Subject:

English

Publication Date:

March 6, 2020

ISBN/ISSN:

9781513527017/1018-5941

Stock No:

WPIEA2020051

Format:

Paper

Pages:

41

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