Shocks and Coping in shock by 8% and a large fall in crop sales prices by 11% of rural households. In Nigeria, price Sub-Saharan Africa shocks are the most frequently occurring shock type in both urban and rural areas, reported by By Rasmus Heltberg almost 19% of rural households and over 22% of urban ones. The corresponding figures for Despite the fact that economic shocks are widely Malawi are 40% and 38% respectively. Given the perceived to be important facets of life for many global food price crisis during the survey period, households in sub-Saharan Africa, with important the perception of high food price risk is implications for well-being and poverty, data on unsurprising, although the extent to which it the prevalence of shocks and the strategies by seems to impact rural households in some which households cope are lacking. By including African countries is worth noting. shocks modules in its household questionnaires, the LSMS-ISA project fills this gap by collecting Natural hazards. Within the range of natural comparable data on shocks across a national hazards, drought is the most common, followed sample of urban and rural households in five by flooding and crop disease. African countries. Poor health. Health shocks (death, illness and Data from surveys in Malawi, Niger, Nigeria, accidents) rank high in all countries with shock Tanzania, and Uganda, paint a picture of the data. Death and illness of breadwinners and shocks that households experience, and how the other household members is another risk responses to these shocks can entail negative category. In Tanzania, roughly 20% of rural consequences such as asset loss, reduced households report a death or illness shock in the nutrition, and impacts on human capital. The five years prior to the survey. Deaths and data shows that protection against risk remains illnesses are the most common shocks in both inadequate, and coping with shocks relies almost rural and urban Nigeria, at 27% and 30% exclusively on informal mechanisms. respectively. In Uganda, health shocks (23% in urban areas and 16% in rural areas) are second Most Common Risks only to natural hazards. By comparison, Malawi Natural hazards, health shocks and price changes and Niger had lower rates of health shocks, are the dominant sources of risk in Africa’s rural about 12 percent nationally. The Malawi, Nigeria areas, with high prevalence in urban areas as and Tanzania surveys asked for rankings of well. Price changes are the most common shocks shocks by severity; results suggest that deaths reported: in four of five countries, between one and illnesses have the most severe impacts. quarter to one third of all households reported such shocks. Natural hazards and health crises Other factors driving shocks. Relatively few are a close second, and in some cases even more households report loss of employment as a common than price changes. major shock, reflecting the fact that little wage/ salary employment exists, and most household Prices. Price shocks encompass several domains. income comes from farming and very small In Tanzania, a large rise in food prices is reported household enterprises. Crime and violence is as a negative shock by 17% of rural households, important in specific countries: Uganda had the while input price increases are reported as a highest rates of reporting (13% of urban households and 10% of rural). In other countries, Living Standards Measurement Study Brief Series www.worldbank.org/lsms-isa rates were under 10 percent, and as low as 3 households with a shock reporting this strategy. percent in Niger. In rural Malawi and Uganda, in contrast, reliance on savings is the single most common response As expected, some shocks affect the poor more (20% and 22% of shocks, respectively). While than others. Serious illnesses or accidents to reliance on own savings is universally used by household members occur thrice as often for the households, other strategies are employed poorest quintile in Malawi (at 10%) as they do for depending on the type of shock faced. For the richest quintile (at 3%). In places like rural example, urban households in Malawi are more Uganda, droughts are a serious concern across all likely to reduce their food consumption in quintiles, as the difference between the richest response to droughts and food price shocks (53%) and poorest (64%) quintiles is not very compared to other shocks; perhaps because large. Other shocks such as theft seem to affect these shocks change the value of food. richer quintiles more, where the richest households in rural Uganda report four times as Some of these coping responses may have many incidences of theft (at 18%) as the poorest adverse consequences for households and for quintile (at 4%). Despite some notions that urban economic growth, although the surveys do not and rural households experience very different appear to directly shed light on this. Nutrition, shocks, food price shocks and rainfall shocks assets, and human capital may be lost when affect both rural and urban areas. This provides households cope with shocks. nuance to the view held by some that food price shocks are mostly an urban concern and climate In some surveys, respondents were asked about shocks a rural concern. the nature of loss associated with shocks (e.g., if the shock resulted in a loss of assets, income, or Figure 1: Percentage of Households Reporting both (some surveys add more categories)). Loss a Shock by the Four Main Categories of income emerges as the most common consequence following most shocks. For 70 example, in rural Malawi, 80% of people who 60 experienced a shock report income loss, 71% 50 report loss of food stocks, 70% report impacts on food production, 43% report impacts on food 40 purchases, and 38% report loss of assets. Prices 30 Generally, loss of income following shocks is far Nat Hazards more prevalent than loss of assets. 20 Health 10 While these data offer new insights, they are not Other able to answer some important questions about 0 the impact of risk, including the costs of risk (ex UG Rural NGA Rural MW rural MW Urban TZ Urban NIG Rural TZ Rural NGA Urban NIG Urban UG Urban ante through preparation against shocks and ex post through coping mechanisms employed) and the effectiveness of risk reduction and social protection programs. Note: Recall period was 12 months for Malawi, Niger & Uganda, and 5 years for Nigeria and Tanzania. This brief is based on: Heltberg, Rasmus, Faiyaz Talukdar and Ana Maria Oviedo (2013). Shocks How Do Households Cope? and coping in sub-Saharan Africa. Background Coping with shocks relies almost exclusively on paper for the World Development Report 2014. informal mechanisms. Reducing consumption, Washington, D.C., The World Bank. selling assets, and seeking assistance or loans from family and friends are the most common For more information, please visit: responses to shocks, with very limited reliance on www.worldbank.org/lsms-isa formal credit, insurance and social protection. In Nigeria’s rural areas, for example, the three most Or contact: common coping responses are assistance from Rasmus Heltberg, World Bank family and friends, sale of livestock, and reduced rheltberg@worldbank.org food consumption, in that order. Informal credit and assistance from family and friends was also very common in Niger, with one-fifth of all Living Standards Measurement Study Brief Series www.worldbank.org/lsms-isa