Linking Household Income Shocks and Coping Mechanisms

Many times anecdotal examples about coping mechanisms used by households are used to make the case for various types of policies. Common coping mechanisms used by households may include selling assets, taking children out of school and borrowing or using up savings. All of these strategies have an impact of human capital development. However available data has not been fully exploited in order to have an overview of what is the hard evidence supporting many of these claims. The present document presents an analysis of available data on shocks and coping mechanisms from household surveys of six countries in Latin America and the Caribbean. Special emphasis is put on low income households and on the link between specific shocks and particular coping mechanisms. An extension of the analysis is done using panel data from the evaluation of the Oportunidades program in Mexico in order to measure more accurately the effect of shocks on income and consumption of households. Results should show to what extent different shocks have an impact on income or consumption in the case of Mexico the incidence and use of various coping mechanisms in a series of countries and the link between a specific shock and a specific coping mechanism.