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Shocks
and their consequences across and within households in rural Zimbabwe
John Hoddinott,
United States Agency for International Development (USAID)
October 31, 2004
http://www.reliefweb.int/rw/RWB.NSF/db900SID/EVIU-68SJJJ?OpenDocument&rc=1&cc=zwe
Rational
but harmful
In
many developing countries, a household’s assets often perform more
than one function. For example, assets such as livestock can be
both a store of wealth and the means by which income is generated.
Given these roles, selling assets in immediate response to a shock
risks permanently lowering future consumption. Consequently, households
may choose to "smooth assets" rather than "smooth consumption"-that
is, they may choose to retain their livestock assets even though
that could mean the family will suffer through a phase of hunger.
Both an older, qualitative literature on drought shocks and more
recent econometric work find that many households do not draw down
assets such as livestock even during disasters such as droughts.
There are, however,
a number of limitations with this extant literature. First, it almost
always takes the household as the unit of analysis and therefore
does not address the importance of intrahousehold allocation. Variations
in consumption may not be distributed equitably across household
members, which has health and nutritional implications. Second,
if there are links between nutrition and productivity (and a growing
body of literature suggests that such links exist) then the distinction
between "asset" and "consumption" smoothing is overstated. Instead,
the true distinction is in household choices regarding which type
of capital-physical, financial, social, or human-should be drawn
down given an income shock. For example, if it is possible to draw
down the health stocks of all or some members of the household without
falling below a level of health stock from which it is impossible
to recover, then this may be a rational strategy to follow.
This brief seeks
to link the extent to which households smooth consumption or smooth
assets, the empirical evidence on the churning of households in
and out of poverty, and the possibility that temporary shocks can
have permanent consequences. The research disaggregates the impact
of shocks by levels of asset holdings and disaggregates the impact
on individual welfare. In this way, we assess the validity of distinguishing
between asset and consumption smoothing and provide insights into
whether poverty dynamics assessed at the household level provide
an adequate picture of the dynamics at the individual level.
Unique data
Our
analysis draws on a unique data set from rural Zimbabwe (collected
by Dr. Bill Kinsey), where an initial survey of approximately 400
resettled households was undertaken during 1983 and 1984. The households
all were in resettlement schemes established in Zimbabwe’s three
agriculturally most important agro-climatic zones, corresponding
to areas of moderately high, moderate, and restricted agricultural
potential. Households were reinterviewed in 1987 and then interviewed
annually from 1992 to 1999.
These resettled
households were not given ownership of the land on which they were
settled but instead were given permits covering residential and
farm plots. Each household was allocated 5 hectares of arable land
for cultivation, with the remaining area in each resettlement site
being devoted to communal grazing land. The Zimbabwean government
expected male heads of households to rely exclusively on farming
for their livelihoods. Until 1992, male household heads were not
permitted to work elsewhere, nor could they migrate to cities. Although
this restriction has been relaxed, with male heads in some cases
being allowed to work off farm, agriculture continues to account
for at least 80% of household income in non-drought years.
Villages in
the resettlement schemes are small and surrounded by cultivated
fields, which has precluded the development of small markets. A
striking visual feature is the absence of shops or trading areas.
Instead, each scheme has a centrally located "rural service center"
where government offices, a health clinic and shops are found. Cattle
sales also are held here.
The sample had
a number of desirable properties. Approximately 90% of households
interviewed in 1983/84 were re-interviewed in 1999. Relocation to
the area preceded, by a significant period of time, the drought
that occurred in 1994/95. The repeated observations make it possible
to control for any correlation between explanatory variables and
fixed, unobserved characteristics. Because the survey was conducted
at almost exactly the same time each year, seasonal considerations
are minimized. The fact that there was little pre-existing nonagricultural
activity in the area meant that few households mitigated the drought
shock through non-farm income. Because there was little migration
from the area, HIV infection seems to play a much smaller part in
explaining trends in adult health than might be the case in other
parts of sub-Saharan Africa. Furthermore, individual level data
are available on anthropometric outcomes, body mass for adults and
growth rates for children under six years of age.
As in many other
rural areas in developing countries, livestock represent the preferred
means of accumulating wealth. Two oxen are needed for ploughing
and farmers state that in order to maintain herd size, they need
a minimum of two cows or heifers. Consequently, our observations
provide a good window into the extent to which there is asset smoothing
while the minimum of oxen and cows/heifers needed establishes the
threshold.
While these
surveys were underway, Zimbabwe experienced a drought in 1994/95,
with rainfall levels 20- 40% lower than long-term averages. This
drought led to marked reductions in both crop and total household
incomes (see table). The longitudinal nature of the data, the presence
of the drought midway through the data collection, and the existence
of household and individual level data allow us to address issues
not only of poverty dynamics within households, but also the effect
poverty dynamics have on the welfare of individual members.
Shocks and
asset sales
As
mentioned, the third year of our data period (1994/95) was a major
drought year, which was followed by a recovery year. With harvesting
typically occurring in May and June, the survey took place each
year in February and March, a time deliberately chosen so as to
interview households at the height of the "hungry season." Gross
crop incomes fell as a consequence of the drought and other income
sources only modestly offset this drop.
The drought
was associated with a rise in sales of livestock. The percentage
of households reporting oxen sales jumped from 15.3 in 1995, to
36.3 in 1996, before falling to 18.7 in 1997. (Because of the timing
of the harvest and interviews, 1996 reflects the adverse consequences
of the drought and is considered the "drought year" in the data.)
Another way of expressing the findings is in terms of the ratio
of sales to prior levels of oxen ownership. Between 1995 and 1996,
this ratio more than doubled-from 0.06 to 0.16-before dropping back
to 0.097 in 1997.
The research
found that sales were strongly affected by pre-drought asset levels.
We distinguished between households owning no livestock, households
holding one or two animals, and households owning more than two.
More than half the households (52.8%) owning more than two oxen
sold at least one in the aftermath of drought, compared to 15% of
households owning only one or two oxen. The tendency was the same
whether a family owned oxen or cows, though the scale was different:
over a quarter of households (27%) owning two or more cows made
at least one sale compared to 4.6% of households owning one or two
cows.
In 1996, 46.9%
of all respondents indicated that they sold oxen in order to purchase
food, while 50.6% sold cows in order to buy food. This is in stark
contrast to non-drought years when other reasons, such as the need
to generate cash to pay school fees or purchase agricultural inputs,
are considerably more prevalent for selling assets.
These descriptive
results are consistent with the argument that assets are used to
buffer consumption following a drought shock but that the threat
of poverty traps means that only the better-off households are likely
to use such a mechanism. Our econometric analysis showed that households
with prior ownership of more than two animals were considerably
more likely to sell in the aftermath of a negative rainfall shock
than households with only one or two animals. Better-off households
do indeed draw down assets following an income shock, but the threat
of a poverty trap means that less well off households do not do
so.
Whose consumption
is being smoothed?
Using
anthropometric data on adults and children under six for the same
study period of 1994-99, we examined the effects of the shock on
the welfare of individuals within the household. An adult individual’s
body mass index (BMI) is defined as weight (in kilograms) divided
by the square of height (in meters). Measured yearly, variations
in an individual adult’s body mass reflect variations in weight
brought about by changes in energy intake, activities and, therefore,
energy expenditures or illness.
Men and women.
The drought appears to have had no effect on men’s BMI, while women
appear to have been adversely affected, with their BMI falling,
on average, by 3.1% in one year (see table). Yet women also appear
to recover quickly. In households that sold livestock, the fall
of women’s BMI was smaller and their BMI recovered quickly the following
year.
Changes in livestock,
when treated as endogenous, raise the BMI of women but not of men.
This deserves further comment in light of recent findings that in
the very different environment of semi-arid West Africa, livestock
transactions do not appear to play a major role in household consumption
smoothing. We hypothesize that livestock holdings are working through
two channels. First, this may capture a wealth effect-livestock
are a relatively liquid store of wealth whose real value has been
maintained in the Zimbabwean context of persistent inflation. Second,
livestock, especially oxen, can substitute for a wide variety of
labor tasks. Although ox-plowing rather than manual hoeing comes
most readily to mind, oxen can also be used to pull carts that carry
firewood and water, an activity regarded as a woman’s responsibility
in the survey area. Not only does animal haulage reduce human energy
expenditures, it also allows greater quantities of wood and water
to be collected during a single trip.
Children. The
drought did not have a statistically significant effect on the growth
rates of older pre-schoolers, yet it did lower annual growth rates
of children aged 12-24 months. Four years after the drought, that
latter group remained shorter than children who had not experienced
a drought when they were 12-24 months of age. The impact is greatest
among children living in households with livestock holdings below
the median in 1995-and 78% of households with two or fewer oxen
had livestock holdings below the median. These households were not
selling livestock in the aftermath of the 1994/95 drought even though
they had assets that they could have sold. Children younger than
two lost 15-20% of their growth velocity, and those residing in
poor households, including households that did not sell assets,
are likely to have suffered a permanent loss in stature, schooling
and earnings.
Other research
has shown that children who were adversely affected by the 1982-84
drought in Zimbabwe had permanent reductions in attained height
in young adulthood and poorer educational attainments. The same
long-term costs can be expected of the children affected by the
1994/95 drought in terms of lowered stature and poorer educational
attainments. These factors can, in turn, carry costs in terms of
foregone earnings.
Poverty and
household dynamics
The
findings speak to many current issues in the study of poverty dynamics.
Drought shocks do cause some households to draw down assets, yet
different households may indeed respond differently to income shocks
depending on the level of their asset holdings. The term "consumption
smoothing" seems too broad as it implies that all household members’
consumption may, or may not, be smoothed after a shock. The term
also implies an attempt to preserve assets, but consumption is an
input into the formation and maintenance of human capital. The preservation
of physical assets by these Zimbabwean households led to a temporary
reduction in women’s health and a (likely) permanent reduction in
the human capital of children unlucky enough to be caught in the
aftermath of the 1994/95 drought.
The analysis
reveals that households with higher levels of asset holdings may
choose to cope with a shock by selling some assets in order to buy
food. This decision does not necessarily carry with it a cost to
the family’s future earnings or consumption. Nor does it necessarily
preclude the household’s ability to recover these assets at a later
time. Meanwhile, the poorest families face a starker decision, with
potentially more drastic consequences both in the immediate and
long term. Without a "surplus" of livestock to sell, these families
generally seem willing to hang onto their livestock even though
this means they must endure shortterm hunger. As our analysis shows,
however, such a strategy may also quite likely carry with it a long-term
harmful effect for the most vulnerable members of the family, the
youngest children.
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