Three essays on risk, saving and migration in low-income economies (South Africa, China)

The three chapters of this thesis examine how economic risks impact the life of households in developing countries and how households cope with various risks. Chapter 1 examines how the availability of private saving impact households' incentive to informally share risk with other households within their social network. Different from most research on informal risk sharing, where it is assumed that private saving (as a form of risk management and consumption smoothing) does not take place, this chapter incorporates private saving and then examines the interactions between private saving and informal risk sharing. It is found that, under implementability constraints, the best implementable transfer will be lower when a private saving option is available.; Chapter 2 extends chapter 1's concern with the impact of private saving on informal risk sharing and asks whether temporary risks are informally shared better than permanent risks, due to such problems as moral hazards. The rise of the HIV/AIDS pandemic—which destroys human capital assets and permanently reduces households' income-generating capacity—gives particularly urgency to this question. This chapter builds a theoretical model and an econometric model to decompose the insurance effect between saving and informal risk sharing and then compares the pure effect of informal risk sharing for temporary risks with that for permanent risks. Applying this model to a survey data from South Africa, this chapter does not find significant evidence for better risk sharing of the temporary shocks.; Chapter 3 examines how households in developing countries decrease their income variability through diversification strategy. Using China as an example, Chapter 3 explores how rural households diversify their labor allocation through migration when facing insecurities in land tenure rights and how further privatization of property rights will impact migration. In contrast to unconditional statements that others have made, the model shows that the impact of further privatization on migration will be regime-specific. A switching regression analysis of data from three Chinese provinces in the year 2000 corroborates these theoretical propositions.