Rural households move up and down the poverty line in rural Bangladesh mostly on account of natural and man-made shocks they have to encounter. Current literature attributes movement in and out of poverty to prevalence of shocks. Periodic shocks causing fluctuations in economic well-being are common phenomena everywhere although these fall heavily on the poor. Beside producing immediate hardships, these shocks also generate long-term adverse consequences in terms of asset and income loss and rising expenditures. Both the nature of shocks and the coping mechanism go to determine how people succeed or fail to come out of poverty.
Customarily, shocks are classified as 'covariate' or 'systematic' and 'idiosyncratic'. The former tends to affect a large number of people sharing common characteristics such as floods, cyclones and drop in yield or price of a staple crop. By contrast, idiosyncratic shocks are peculiar to a person or a household such as death or prolonged illness of the major income earner of the family. Impression about the distinction is important to draw policy conclusion - a standard insurance policy may suit the former while it may be unsuitable for the latter.
From the point of view of the impacts of shocks on the household economy and the consequent coping strategy, a more useful way is to look at the nature of impact on the household economy namely, asset, income and expenditure shocks. For example, death of livestock is an asset shock, loss of job an income shock and treatment of illness an expenditure shock.
Coping strategies are also multiple, depending on the nature of shocks and the resources available to the households. They can be classifed as erosive and non-erosive coping strategies. Erosive strategy involves some immediate erosion of the household asset base, while non-erosive strategy keeps the asset base intact, at least in the short-run. For example, sale of land or other assets or drawing on accumulated savings is erosive strategy. "An erosive strategy with long-term consequences would involve stopping children from going to schools either to save on educational expenses or to use children's labour for the purpose of earning additional income. In either case, it would entail a loss of future human capital". Examples of non-erosive strategy include borrowing, drawing upon reciprocal support system, social safety nets etc.
However, the 'vulnerability" context can also be analysed from another angle. Households eke out a living from five types of capital they posses with varying degrees- human capital (H), natural capital (N), financial capital (F), physical capital (P) and social capital (S). The capital looks like a diamond and size of the diamond depends on the magnitude of the capital possessed. Thus a poor man would have a smaller diamond as he would have less land and meagre financial, human and social capital. What is more important is the fact that this diamond is affected by exogenous factors like seasonality, shocks, trend etc. For example, a shock like river erosion could erode natural resource base to reduce the size of the diamond. On the other hand, the size of the diamond could also protect the household from the vagaries of the exogenous factors e.g., a wealthy household could withstand health shocks better than poor households.
Based on analysis of poverty dynamics, a research report observed that over half of the rural households reported facing shocks during 1997-2007 and another source found 40 per cent of rural households reported to have faced shocks during 2007-2010. Dr Mahabub Hossain and this writer, based on panel data and poverty dynamics, observed that 43 per cent of the households lived with shocks during 2000-2008 period. Again, considering the provision of food, the World Food Programme recorded that 42 per cent of rural households are vulnerable. By and large, vulnerability or shocks seem to grip about 40-50 per cent of rural households.
 In response to a question whether households faced any shock during the last three years preceding the period of the census (2010-2013), about 14 per cent of households reported that they faced shocks. Apparently, the ratio is much lower than shown by earlier studies mentioned above. However, when households are classified by districts and villages, the difference narrows down. We find that in villages of 8 districts, the incidence hovers around 33-56 per cent (highly vulnerable); in 6 other districts, the incidence is 20-28 per cent (moderately vulnerable). Taken together, we can possibly argue that 25-40 per cent of households faced shocks of any kind during 2010-2013 period.
    About 44 per cent of the total shocks are income shock followed by expenditure shock (about 40 per cent), and asset shock (16 per cent). Income shocks are dominated by natural calamities such as flood/heavy rains and cyclone/tornado. The expenditure shock arises predominantly from health hazards such as treatment of illness. Many migrants are deceived by agents who put them in peril. Finally, among the asset shocks, loss of livestock is on top.
Farm households seem to be more prone to shocks than other occupational groups. It is largely because natural calamities affect farm output and houses. The incidence is higher in Chittagong and Dhaka than in Barisal, or Rajshahi, only more for land owners than landless, and more for educated and rich than uneducated and poor ones. This information may appear surprising in the wake of relatively higher incidence (40-50 per cent) shown above. But one has to remember that the mean values for this study come from a census of 25,000 households covering 62 villages across different agro-ecological zones.
 It was found that the poor are not necessarily more vulnerable than the non-poor as the uneducated or landless ones are not more vulnerable than their respective counterparts. It is true that the consequences of any given shock may be more devastating for the poor, but as far as frequency of shock is concerned, they may not perform worse. The findings agree with those of other researchers who observed that the incidence is likely to rise with the standard of living e.g., well-off group suffering from the highest incidence of all types of shocks with the relatively more educated suffering most from shocks (standard of living effect).
The writer is a Professor of Economics at Jahangirnagar University.
Email:abdulbayes@yahoo.com
Shocks rural households endure
Abdul Bayes | Published: May 06, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
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