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Shocks and coping actions of rural households

empirical evidence from Northeast Thailand

Songporne Tongruksawattana
H Waibel
E Schmidt
2010

Abstract

Rural households in emerging market economies countries are vulnerable to poverty as a result of negative shocks and because of their limited capacity for effective ex-post coping.  urthermore, their often excessive ex-ante risk management efforts can limit their ability to build up an asset base that will take them sustainably out of poverty. This study analyses the relationship between shock type and coping decisions of rural households in Thailand. The analysis proceeds in two steps. First, a dichotomous choice model is used to assess under what circumstances households take up shock coping actions. In the second step the choice of coping action are analysed using a multivariate model. The data used for this analysis are from the large-scale panel household survey of some 2200 households in three provinces in Northeast Thailand in the context of the DFG Research Unit 756. The data cover the period of May 2006 to April 2008 which captures two full crop years. Results show that a large share of rural households has experienced different types of shocks mainly related to ecological but also from other economic, demographic and social factors. The majority of households undertake coping actions in response to shocks. Households that refrain from coping actions are mostly those that experienced ecological shocks. Results from the univarate probit model show that the main factors that cause a household to actively respond to shocks are wealth status and the severity of the shock in terms of income and asset losses. Regarding the type of coping action asking for more remittances from migrant household members and relatives, taking up opportunities for public transfers, reallocate household resources especially labour, to borrow from formal and informal sources of finance, to draw on available savings and selling assets are dominant. The multivariate probit model further elaborates the effect of shock types, household characteristics and location factors on the choice of coping activity. Overall, the results of this analysis suggests that that shocks experienced by rural households in emerging market economies are likely to have implications for their future welfare status and that more effective social risk management strategies are needed.

Publication Type(s)

Conference Paper

Ten Years of War Against Poverty Conference Papers

Conference: Ten Years of War Against Poverty

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