Informal insurance, public transfers and consumption smoothing

In many developing countries, public programs in the form of food aid distribution and food-for-work programs are often meant to protect vulnerable households from consumption and nutrition downturns by providing a safety net. Few studies have evaluated the impact of these programs. Furthermore, households often use a variety of informal mechanisms to cope with risk, including mutual support and risk-sharing. In this paper we look into the extent to which food aid helps to smooth consumption by reducing the impact of negative shocks, paying attention to program placement e¤ects. Using panel data from Ethiopia, we ...nd that despite poor targeting of the food aid, the programs reduce some of the vulnerability to common shocks via intra-village risk sharing. JEL CODES D91, I38, O17