Gan, LiXu, Lixin ColinYao, Yang2012-06-042012-06-042007-04https://hdl.handle.net/10986/7064While the literature on consumption insurance is growing fast, little research has been conducted on how rural consumption insurance is affected by democracy. In this paper the authors examine how consumption insurance of Chinese rural residents is affected if the local leader is democratically elected. Exploring a unique panel data set of 1,400 households from 1987 to 2002, they find that consumption insurance is more complete when the households are in villages with elected village leaders. Furthermore, democracy improves consumption insurance only for the poor and middle-income farmers, but not for the rich. These findings underline the importance of democratic governance for ensuring better rural consumption insurance and poverty reduction.CC BY 3.0 IGOADMINISTRATIVE COSTSAGRICULTUREANNUAL GROWTHANNUAL GROWTH RATEAVERAGE ANNUALAVERAGE INCOMEBUDGET CONSTRAINTCONSUMPTION GROWTHCONSUMPTION INSURANCECONSUMPTION LEVELSCONSUMPTION SMOOTHINGCREDIT MARKETCROSS SECTION UNITDATA SETDECENTRALIZATIONDEMAND FOR CONSUMPTIONDETERMINANTS OF CONSUMPTIONDEVELOPED COUNTRIESDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSECONOMETRICSECONOMIC ANALYSISECONOMIC DEVELOPMENTECONOMIC EFFECTSECONOMIC OUTCOMESECONOMIC PERSPECTIVESECONOMIC REVIEWEMPIRICAL ISSUEEMPIRICAL RESULTSEXPLANATORY POWEREXPLANATORY VARIABLEFARMERSFUNCTIONAL FORMFUTURE RESEARCHGDPGDP PER CAPITAGOVERNMENT REGULATIONSGROWTH EQUATIONHOUSEHOLD CHARACTERISTICSHOUSEHOLD CONSUMPTIONHOUSEHOLD CONTROLSHOUSEHOLD DATAHOUSEHOLD HEADHOUSEHOLD HEADSHOUSEHOLD INCOMEHOUSEHOLD MEMBERSHOUSEHOLD SIZEHOUSEHOLD SIZESIDIOSYNCRATIC SHOCKSIMPLICATIONS FOR CONSUMPTIONINCOMEINCOME GROUPSINCOME GROWTHINCOME LEVELINCOME SHOCKSINCOME SMOOTHINGINCOMESINFORMAL INSURANCELEVELS OF CONSUMPTIONMEASUREMENT ERRORSMEDIAN VOTERMEDIAN VOTER THEOREMMEDIAN VOTERSMIDDLE CLASSNEGATIVE EXTERNALITY0 HYPOTHESISOPTIMIZATIONPOLICY IMPLICATIONSPOLICY RESEARCHPOLITICAL ECONOMYPOORPOOR FARMERSPOSITIVE EFFECTPOVERTY REDUCTIONPUBLIC CHOICEPUBLIC ECONOMICSPUBLIC EXPENDITUREPUBLIC EXPENDITURESPUBLIC GOODSREDUCING POVERTYREDUCTION IN CONSUMPTIONRISK AVERSIONRISK SHARINGRURALRURAL AREASRURAL CREDITRURAL ECONOMYRURAL HOUSEHOLDRURAL HOUSEHOLDSRURAL RESIDENTSSAVINGSSIGNIFICANCE LEVELTAXATIONTOTAL INCOMEUTILITY FUNCTIONVILLAGE LEADERSWEALTHWorld Bank10.1596/1813-9450-4205