Idiosyncratic Shocks and Welfare Dynamics in Akwapim South

District :Some Preliminary Results

ByAndrew Adjei-Holmes (ISSER, UoG)

Ernest Aryeetey (ISSER, UoG) Christopher Barrett (Cornell University)

Robert Darko Osei (ISSER, UoG)Thomas Walker (Cornell University)

Presented at ISSER, 15th July, 2010

An introduction Main Research Questions Some Preliminary Results Some concluding remarks

Structure of Presentation

Idiosyncratic risks (shocks) tends to dominate covariate risks in rural incomes in Africa and Asia

They can affect household incomes directly – e.g. loss of job Such shocks affect rural incomes through asset

accumulation and productivity – funeral rites In Ghana, such shocks are widespread and are

important determinants of current incomes of rural households

Improving the management of such risks will improve the rate of asset accumulation by households – and therefore improve household incomes

An introduction

The ability of households to cope with such shocks depends on among other factors, how socially connected households are

Evidence suggests that shocks have persistent effects on asset dynamics of households that are least connected

There are different mechanisms that help households deal with such shocks –

Examples in Ghana include hometown associations (and others) and other informal insurance mechanisms such as funeral contributions.

The aim of the project is to ◦ study the nature of idiosyncratic shocks that

affects households, ◦ The effects of these shocks on households◦ The nature and type of mechanisms that help

mitigate the effects of these shocks

Some Preliminary ResultsDarmang Pokrom

Darmang

-40 -30 -20 -10 0 10 20 30 40

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65+

-40-30-20-10010203040

Pokrom

-50 -40 -30 -20 -10 0 10 20 30 40 50

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65+

-50-40-30-20-1001020304050 Oboadaka Konkonuru

Oboadaka

-40 -30 -20 -10 0 10 20 30 40

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65+

-40-30-20-10010203040

Konkonuru

-40 -30 -20 -10 0 10 20 30 40

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65+

-40-30-20-10010203040

Male Male

Male Male Female Female

Female Female

Age Distribution of Households

  Darmang Pokrom Oboadaka KonkonuruEastern Region National

None 8.8 11.6 22.0 12.8 14.5 16.8

Primary 21.6 28.3 28.4 16.1 36.4 35.5

Junior 61.5 50.0 37.6 59.1 24.7 21.8

Senior 2.0 5.8 5.7 6.0 5.4 7.4

More 0.1 0.0 0.1 0.1 4.4 6.5

Highest school level attended (per cent of respondents)

Damang seems to trail the other villages in terms of senior high school attainment

Junior school attainment is higher than the national average – lagged effects of capitation grant?

Reasons for leaving School (per cent of respondents)

The main reason why people would have left school is because they could not afford it

In Pokrom and Oboadaka people left to help parents – Is there a Pineapple story?

  Darmang Pokrom Oboadaka KonkonuruHad enough education 14.7 5.4 7.5 8.5Failed exam 7.4 2.3 4.2 7.8No higher school/grade 0.7 2.3 0.0 1.6Could not afford to go 66.9 72.3 62.5 69.8To help parents 2.2 9.2 7.5 3.1Was ill 0.0 3.8 1.7 2.3Marriage/pregnancy 4.4 0.8 5.8 1.6Other 3.7 3.8 10.8 5.4

Source of Drinking Water for Household

  Konkonuru Oboadaka Pokrom DarmangEastern Region National

Well with pump / borehole 92.9 33.3 26.0 60.5 27.1 30.4

Well without pump - 48.0 2.7 24.7 13.0 10.3

River 1.2 17.3 63.0 7.4 20.4 11.4

Public pipe/tap 2.4 - 1.4 1.2 15.6 10.7

Private outside pipe/tap - 1.2 - 1.2 2.5 5.0

Neighbouring HH - 1.3 - - - -

Other 3.6 - 6.9 4.9 21.4 32.2

Occupation (per cent of respondents)  Darmang Pokrom Oboadaka Konkonuru

ItemFemale

(%) Male (%)Female

(%) Male (%)Female

(%) Male (%)Female

(%) Male (%)Artisan 1.2 2.6 4.8 6.9Baker/cook 1.2 1.3Carpenter/carver 5.3 1.5 8.3Construction worker 2.6 1.5 8.3Factory worker 2.6 1.5 2.8Farmer 31.7 55.3 41.4 83.8 56.4 94.2 51.8 37.5Hairdresser 6.1 2.9 1.3 7.2Health worker 1.2 1.4Herbalist 1.4Mason 1.5 6.9Not in labor force 4.9 1.3 2.9 1.3 1.5 3.6 2.8Not specifiedOffice worker 1.3 1.5 1.2 2.8Other 8.5 5.3 2.9 1.5 1.3 4.8 2.8Shop attendant/trader 41.5 1.3 47.1 1.5 37.2 1.5 24.1 2.8Student 1.4Taxi/tro-tro driver 10.5 4.4 8.3Teacher 2.4 7.9 1.5 4.2Truck driver 1.2 1.3   2.9        Unemployed 1.3 2.9 2.6 2.4 1.4Total   77   71   70   72

Men are more likely to be employed as farmers generally –

However this is not true for Konkonuru Women are more likely to be a shop

attendant or trader The Nsawam effect is quite evident in

Damang – more taxi and trotro drivers There are also signs of the Aburi effect on

Konkonuru

Consumption by Households (Monthly GHC)

On average individuals in these communities are very close to the poverty line

Community

Food, purchased

Food, from farm

Other purchases

Total consumption

PC Cons/day (US$)

Darmang Total125.86 38.94 139.02 303.82

P/C 29.96 9.39 33.59 72.94 1.68

Pokrom Total88.75 42.61 177.58 308.94

P/C 18.91 9.21 33.58 61.7 1.42

Oboadaka Total77.43 51.48 107.72 236.63

P/C 17.6 11.68 25.14 54.42 1.25

Konkonuru Total125.75 28.4 139.36 293.51

P/C 33.83 7.12 34.63 75.58 1.74           

Household Incomes (Over Past 2 months - GHc)

Income seems to be higher in the communities that do less farming of pineapples

Round FarmsOther

Bus. WagesOther Farms

Other Income

FarmCons’n

TotalIncome

Darmang 1 3.96 132.34 51.25 2.25 4.42 46.78 240.992 -12.27 131.26 68.22 7.97 7.29 43.34 245.813 -14.02 141.45 89.55 6.30 9.97 33.23 266.484 -7.88 125.84 72.31 2.29 12.13 37.50 242.195 -6.63 117.27 72.75 0.42 9.15 33.85 226.81

Pokrom 1 -27.87 11.29 38.58 14.87 15.19 47.35 99.412 -70.25 108.96 38.46 8.21 45.49 34.51 165.373 -25.66 63.00 28.11 1.04 22.04 39.49 128.034 -30.70 38.83 55.35 9.55 16.09 46.75 135.865 -29.29 57.59 31.02 18.77 36.13 44.96 159.18

Oboadaka 1 -3.98 20.74 35.84 15.21 0.00 57.46 125.272 -31.45 87.58 30.25 0.10 14.89 44.23 145.593 -18.16 59.98 25.07 1.57 25.11 44.02 137.604 -8.09 53.83 25.07 5.42 18.33 55.51 150.075 -6.83 37.84 20.56 0.85 24.76 56.17 133.36

Konko- 1 -0.27 174.92 93.79 -0.77 3.06 35.76 306.50Nuru 2 -2.52 93.21 150.14 3.15 21.31 27.44 292.72

3 -5.03 150.96 154.61 0.00 8.67 23.31 332.524 -3.77 137.04 147.82 0.00 12.23 25.83 319.155 -3.36 123.95 147.38 1.09 14.84 29.68 313.58

Mean Transfers – Given and received by age

Two interesting observations here Net transfers received is higher for older people (pensioners) Generally households are net receivers – consistent with

consumption > incomes

0

10

20

30

40

20 40 60 80 100 120 140 160 1800

10

20

30

40

Cash transfers In-kind transfers

Receipts Receipts

GiftsGifts

20 40 60 80

GHc GHc

Household Asset- Mean GHC

Community Round Perishables Durables LivestockFinancial

assets Total assetsDarmang 1 65 839 170 1,099 2,174

2 32 1,669 182 1,013 2,8953 9 818 167 737 1,7314 27 859 185 979 2,0515 31 872 168 762 1,834

Pokrom 1 554 4,814 576 2,515 8,4602 251 3,790 597 1,501 6,1393 83 4,191 639 1,242 6,1564 194 3,422 641 1,121 5,3785 169 2,688 575 1,135 4,567

Oboadaka 1 167 493 233 885 1,7782 100 601 261 973 1,9353 72 648 272 757 1,7484 132 569 303 728 1,7325 166 550 263 668 1,647

Konkonuru 1 31 461 145 917 1,5532 19 517 194 873 1,6033 11 799 163 800 1,7734 16 500 164 715 1,395

  5 19 477 140 922 1,558

Financial assets seem to dominate except for Pokrom where durables are quite important

Maybe related to history of pineapple business in pokrom

Pokrom still dominates in terms of total assets

Possibly driven by outliers

Shocks to the Household - Damang

ShockValue of Loss No of time

occurredExtent of

shock

Loss of productive assets 6,000 1 1Loss of contract or default by creditor 1,239 2 2Loss of a regular job of a household mem 1,140 1 1Death of other household member 814 1 1Loss or destruction of other consumption 433 1 2ACCIDENT (DESTRUCTION OF BEER BAR) 400 1 1Divorce, separation or abandonment 400 1 2Funeral expenses 354 3 2Loss of income due to illness or injury 293 1 1Failure or bankruptcy of business 257 2 2Death of household head or spouse 233 1 1Major loss of crops due to drought 200 1 2Loss of livestock due to theft 178 3 2Medical expenses due to illness or injury 176 2 2Division of father’s property 175 1 3Major loss of crops due to pests and dis 170 1 2Loss of livestock due to death 158 4 2Major loss of crops due to other reasons 150 1 2ACCIDENT 100 1 2

Shocks to the Household - Konkonuru

Shock

Value of Loss No of time occurred Extent of

shock

Loss of productive assets 400 1 1

DEATH OF 4 UNCLES 300 4 1

Division of father’s property 300 2 2

Funeral expenses 300 4 2

Major loss of crops due to other reasons 212 1 2

Loss or destruction of other consumption 200 2 2

Cut-off or decrease of regular remittanc 153 3 2

Loss of contract or default by creditor 135 8 2

Loss of livestock due to theft 132 3 2

Loss of livestock due to death 91 3 2

Failure or bankruptcy of business 82 1 3

DEATH OF MOTHER 50 1 3

Shocks to the Household - Oboadaka

ShockValue of Loss

No of time occurred

Extent of shock

COMPENSATION (SHOT AND KILLED A MAN) 5,000 1 1SHOT A MAN TO DEATH 5,000 1 1DUPED 3,000 1 1FRIEND DEFRAUDED HIM 2,900 1 1PREGNANCY EXPENSES 1,500 1 1Failure or bankruptcy of business 1,266 18 2Loss of contract or default by creditor 948 22 2COURT EXPENSES 920 1 1Funeral expenses 876 22 2Division of father’s property 800 2 1TWO CHILDREN IN SAME CLASS 400 1 2Withdrawal of government or NGO assistan 290 1 2LOW MARKET PRICE FOR PINEAPPLES 200 2 1MY DOG BIT SOMEBODY 200 1 4OUR DOG BIT SOMEBODY 200 1 3Loss of livestock due to death 166 2 3Loss of livestock due to theft 141 1 2Loss or destruction of other consumption 75 1 2Major loss of crops due to other reasons 53 1 1

Shocks to the Household - PokromShock Value of Loss No of time occurred Extent of shockLost home 5,000 1 1Cut-off or decrease of regular remittanc 4,600 2 1Death of household head or spouse 4,500 1 1Loss of a regular job of a household mem 4,355 1 1Loss of contract or default by creditor 1,779 1 1Failure or bankruptcy of business 1,119 1 1Funeral expenses 1,083 1 2Major loss of crops due to drought 833 1 3Major loss of crops due to other reasons 567 1 2Medical expenses due to illness or injur 548 2 2COURT CASE 500 1 2LOSS OF INCOME DUE ARREST OF FAMILY MEMB 500 2 1REPAIRS FOR DAMAGE TO ANOTHER VEHICLE 500 1 1Loss of productive assets 398 1 2Loss of income due to illness or injury 379 1 2Loss of livestock due to death 377 1 2Division of father’s property 316 1 2Loss or destruction of other consumption 225 1 2Major loss of crops due to pests and dis 200 1 3CHILD'S TRAVEL EXPENSES 150 1 2SON'S TRAVEL EXPENSES 150 1 2Death of other household member 140 1 1Loss of livestock due to theft 108 1 3Divorce, separation or abandonment 0 1 2

Coping Strategies of Households – Funeral expenses shock

Coping strategy Damang Konkonuru Oboadaka PokromAte less to reduce expenses 7.02 13.79 ----- 4.65

Ate lower quality food ----- ----- ----- 2.33

Forced to change occupation ----- ----- 2.04 -----

Mortgaged consumption asset ----- ----- 4.08 -----

Mortgaged productive asset 1.75 ----- ----- 4.65

None 36.84 41.38 32.65 48.84

Other ----- ----- 6.12 -----

Sold consumption asset 1.75 24.49 27.91

Sold land ----- 1.72 ----- -----

Sold productive asset 21.05 5.17 2.04 -----

Took children out of school ----- 1.72 ----- -----

Took help from others 7.02 29.31 20.41 6.98

Took loan from informal source 24.56 5.17 8.16 4.65

Took loan from NGO/institution ----- 1.72 ----- -----

Shocks◦ In value terms different shocks ranks differently in

different communities◦ In terms of the number of times these shocks occur,

funerals and death of hh member or relative is important – true across communities

Coping Strategies (Funerals)◦ Majority will not have done anything – could mean

‘most of the above’◦ Getting help from others, taking loans from informal

sources remain quite important Oboadaka and Pokrom, selling of assets is important

Most households in these communities are poor

Idiosyncratic shocks are significant and wide-ranging

Value of shocks sometimes exceed value of consumption

Selling of assets remain an important strategy for coping with these shocks

Other strategies rely on social networks – how connected the households are

Conclusion