Dercon, Stefan2013-12-192013-12-192002-09-01World Bank Research Observerhttps://hdl.handle.net/10986/16419Poor rural and urban households in developing countries face substantial risks, which they handle with risk-management and risk-coping strategies, including self-insurance through savings and informal insurance mechanisms. Despite these mechanisms, however, vulnerability to poverty linked to risk remains high. This article reviews the literature on poor households use of risk-management and risk-coping strategies. It identifies the constraints on their effectiveness and discusses policy options. It shows that risk and lumpiness limit the opportunities to use assets as insurance, that entry constraints limit the usefulness of income diversification, and that informal risk-sharing provides only limited protection, leaving some of the poor exposed to very severe negative shocks. Public safety nets are likely to be beneficial, but their impact is sometimes limited, and they may have negative externalities on households that are not covered. Collecting more information on households vulnerability to poverty through both quantitative and qualitative methods can help inform policy.en-USCC BY-NC-ND 3.0 IGOAGRICULTURAL WAGEAGRICULTUREANALYSIS OF VARIANCEARID TROPICSASSET HOLDINGSASSET VULNERABILITY FRAMEWORKASSETSBARRIERS TO ENTRYBENCHMARKCATTLE OWNERSHIPCHILD GROWTHCHILD HEALTHCHILD LABORCHILD MORTALITYCHRONIC ILLNESSCHRONIC POVERTYCHRONICALLY POORCOMPARATIVE ADVANTAGECONSUMPTION INSURANCECONSUMPTION LEVELSCONSUMPTION SMOOTHINGCOPING STRATEGIESCREDIT MARKET CONSTRAINTSCREDIT PROGRAMSCRISESCROP DIVERSIFICATIONCROP INCOMECROWDING OUTDEPOSITSDEVELOPMENT ECONOMICSDOWNSIDE RISKSDROUGHTDYNAMIC POVERTYECONOMIC CRISISECONOMIC FLUCTUATIONSECONOMIC POLICIESECONOMIC REFORMECONOMIC RESEARCHECONOMIC SHOCKSECONOMICSECONOMICS LITERATUREECONOMICS RESEARCHECONOMIES OF SCALEEMPLOYMENTEQUILIBRIUM ANALYSISETHNIC GROUPSEXPECTED UTILITYEXTENDED FAMILIESFAMINEFARM ACTIVITIESFARM HOUSEHOLDSFARMERSFEMALE LABORFINANCIAL CRISISFINANCIAL MARKETSFOOD AIDFOOD CONSUMPTIONFOOD EXPENDITUREFOOD INSECURITYFOOD INTAKEFOOD MARKETSFOOD PRICESFOOD PROCESSINGFOOD-FOR-WORKFOREIGN EXCHANGEFORMAL SAFETY NETSHOUSEHOLD CONSUMPTIONHOUSEHOLD INCOMEHOUSEHOLD INCOME DIVERSIFICATIONHOUSEHOLD LEVELHOUSEHOLD SURVEYHOUSEHOLD SURVEYSHOUSEHOLD VULNERABILITYHUMAN CAPITALHUMAN DEVELOPMENTHUMAN RESOURCESIDIOSYNCRATIC RISKIDIOSYNCRATIC RISKSIDIOSYNCRATIC SHOCKSIMPACT OF SHOCKSIMPLICIT CONTRACTSINCIDENCE OF POVERTYINCOMEINCOME FLUCTUATIONSINCOME GAPINCOME GROWTHINCOME RISKINCOME SHOCKSINCOME SMOOTHINGINCOME-GENERATING ACTIVITIESINEQUALITYINFLATIONINFORMAL CREDITINFORMAL INSURANCEINFORMAL INSURANCE MECHANISMSINSURANCE MARKETSINSURANCE SCHEMESINSURANCE SYSTEMSINTEREST RATEINTEREST RATESINVENTORYLABOR FORCELABOR FORCE PARTICIPATIONLABOR MARKETLABOR SUPPLYLACK OF WATERLANDHOLDINGSLANDLESSLANDLESS HOUSEHOLDSLDCSLIQUID ASSETSLIQUIDITYMACROECONOMIC POLICIESMACROECONOMIC POLICYMACROECONOMIC STABILITYMANAGERIAL ECONOMICSMARKET LIBERALIZATIONMICROFINANCEMIGRATIONMONITORING COSTSMUTUAL INSURANCENEEDY HOUSEHOLDSNEGATIVE EXTERNALITIESNONFARM INCOMENUTRITIONPERMANENT INCOMEPOLITICAL ECONOMYPOORPOOR HOUSEHOLDSPORTFOLIOPOVERTY ANALYSISPOVERTY DYNAMICSPOVERTY ESTIMATESPOVERTY GAPPOVERTY LEVELPOVERTY LINEPOVERTY MEASURESPOVERTY REDUCTIONPOVERTY REDUCTION STRATEGIESPRECAUTIONARY SAVINGSPRIVATE TRANSFERSPRODUCT MARKETSPROFITABILITYPUBLIC SAFETY NETSPUBLIC TRANSFERPUBLIC TRANSFERSPURCHASING POWERRECIPROCITYRISK AVERSERISK COPINGRISK OF BANK FAILURERISK POOLINGRISK PREMIUMRISK REDUCINGRISK REDUCTIONRISK SHARINGRISK-COPINGROSCASRURALRURAL AREASRURAL COMMUNITIESRURAL CREDITRURAL ECONOMYRURAL HOUSEHOLDRURAL HOUSEHOLDSRURAL POVERTYSAFETYSAFETY NETSAFETY NET PROGRAMSSAFETY NETSSAVINGSSAVINGS BEHAVIORSCHOOL ENROLLMENTSELF-INSURANCESHOCKSMOOTHING CONSUMPTIONSOCIAL CAPITALSOCIAL DEVELOPMENTSOCIAL PROTECTIONSOCIAL SAFETY NETSSOCIAL SECURITYSUPPORT NETWORKSSUSUTARGETED TRANSFERSTARGETINGTARGETING MECHANISMSTAXATIONTONTINESTRANSACTIONS COSTSTRANSIENT ILLNESSTRANSIENT POVERTYTRANSPORTVILLAGE ECONOMIESVULNERABLE GROUPSVULNERABLE HOUSEHOLDVULNERABLE HOUSEHOLDSWAGE EARNERSWARWEALTHWEALTH DISTRIBUTIONWEATHER RISKWEATHER SHOCKSWORK PROGRAMSWORKING CAPITALJournal ArticleWorld Bank10.1596/16419