Dynamics of Formal and Informal Responses to Shocks

The increasing occurrence of natural disasters is creating enormous problems especially for developing countries. While vibrant state and market institutions in developed countries afford capacity to deal with shock effects, weak (state and market) institutions and slow developing economic systems common in most developing countries rather facilitate the transformation of shocks into disasters that often widens the already existing poverty circle. This book discusses the potential strength of combining informal and formal responses for managing aggregate shocks in developing countries. A novel multidimensional framework for analyzing shocks is introduced and supported with empirical evidence from a developing country. This book principally targets experts and students with research interest on (natural) risks and shocks in developing countries. It may also be beneficial for practitioners who wonder why established risk management approaches such as insurance have not been very successful in developing countries and what options or endogenous potentials exist for dealing with extreme events.