Income Risk and the Benefits of Social Insurance: Evidence from Indonesia and the United States / Raj Chetty, Adam Looney.

Format:

Book

Author/Creator:

Chetty, Raj.

Contributor:

National Bureau of Economic Research.

Looney, Adam.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11708.

NBER working paper series no. w11708

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Income Risk and the Benefits of Social Insurance

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

This paper examines the welfare consequences of social safety nets in developing economies relative to developed economies. Using panel surveys of households in Indonesia and the United States, we find that food consumption falls by approximately ten percent when individuals become unemployed in both countries. This finding suggests that introducing a formal social insurance program would have small benefits in terms of reducing consumption fluctuations in Indonesia. However, in contrast with households in the U.S., Indonesians use costly methods such as reducing human capital investment to smooth consumption. The primary benefit of social insurance in developing countries may therefore come not from consumption smoothing itself but from reducing the use of inefficient

smoothing methods.

Notes:

Print version record

October 2005.