Risk vulnerability : risk sharing in Mexican rural households

Abstract

Despite being a middle income economy, Mexico typifies the situation of many low-income countries for the nearly 23 million rural Mexicans living in poverty. Rural households in Mexico live in settings characterized by multiple risks which threaten their livelihoods and impact negatively on their welfare. However, they have not responded passively to the deteriorating situation in the countryside and have developed strategies to cope with hardship. The purpose of this research is to investigate the interconnections between this risky environment, the realization of shocks and the risk management and coping mechanisms available to households and its members. Using a mixed methods approach, the thesis combines qualitative and quantitative analysis. Primary data was collected using semi-structured interviews and a survey designed to capture, in detail, issues related to risk, shocks and risk coping strategies. Secondary data from the Mexican Family Life Survey (MxFLS) was used to test for risk sharing across and within households. Overall, our results show that idiosyncratic and covariate shocks have a negative impact on consumption suggesting that insurance is incomplete across and more importantly, within households. However, households and its members use a portfolio of coping strategies depending on the type of shock. Informal mechanisms in the form of savings, borrowing, transfers, and labour supply adjustments play an important role in consumption smoothing. This thesis makes two important contributions. First, it complements the literature on risk and coping strategies by examining the mechanisms for dealing with shocks and their accessibility to the household. Second, empirical evidence on the negative effects of shocks and the effectiveness of risk coping strategies enhances our understanding of the factors that increase vulnerability to poverty of rural households. This information contributes to the design and implementation of social protection programmes to facilitate the identification of those in need and reach the intended beneficiaries.EThOS - Electronic Theses Online ServiceGBUnited Kingdo