Growing Apart: Declining Within- and Across-Locality Insurance in Rural China

48 Pages Posted: 9 Nov 2021

See all articles by Orazio Attanasio

Orazio Attanasio

Yale University

Costas Meghir

Yale University; Yale University - Cowles Foundation; Institute for Fiscal Studies (IFS); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Corina Mommaerts

University of Wisconsin - Madison - Department of Economics

Yu Zheng

Queen Mary University of London

Date Written: October 2021

Abstract

We consider risk sharing in rural China during rapid economic transformation from the late 1980s through the late 2000s. We document an erosion of consumption insurance against both household-level idiosyncratic and village-level aggregate income shocks, and show that this decline is related to observable economic changes: the shift from agriculture to wage employment, the decline of publicly owned Township-and-Village Enterprises, and increased migrant work. Further evidence suggests that as these changes took place at the village level, higher levels of government failed to offset these effects through the tax-and-transfer system, leaving households more exposed to both idiosyncratic and village-aggregate shocks.

Keywords: Consumption Insurance, Risk-Sharing, Rural China

JEL Classification: D12, E21, H71, O11, O12

Suggested Citation

Attanasio, Orazio and Meghir, Costas and Mommaerts, Corina and Zheng, Yu, Growing Apart: Declining Within- and Across-Locality Insurance in Rural China (October 2021). Available at SSRN: https://ssrn.com/abstract=3960237

Orazio Attanasio (Contact Author)

Yale University

New Haven, CT 06520
United States

Costas Meghir

Yale University ( email )

37 Hillhouse avenue
New Haven, CT CT 06511
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+12034323558 (Phone)

Yale University - Cowles Foundation ( email )

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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

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Corina Mommaerts

University of Wisconsin - Madison - Department of Economics ( email )

William H. Sewell Social Science Building
1180 Observatory Drive
Madison, WI 53706-1393
United States

Yu Zheng

Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

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