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Keywords:

  • Risk management;
  • Productive safety nets;
  • Diversification;
  • Climate change;
  • Randomized experiment;
  • 01;
  • D1

Abstract

Households in developing countries are often highly exposed to risk and despite households’ risk strategies negative shocks often result in substantial welfare losses. Given the possibility that weather risks in particular might be further increasing, there is renewed policy attention on improving households’ risk management strategies. This article provides an overview of insights learned from recent randomized control trials on predictions coming out of the theoretical literature on households’ ex ante risk management. It reveals new puzzles and questions regarding households’ inter-temporal decision making under risk, and draws lessons for effective policy design.