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© 2022 International Monetary Fund
WP/22/64
IMF Working Paper
Asia and Pacific Department
Household Vulnerability to Income Shocks in Emerging and Developing Asia: the Case of Cambodia, Nepal and Vietnam
Prepared by Alessia De Stefani, Athene Laws and Alex Sollaci
Authorized for distribution by Era Dabla-Norris April 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: We leverage survey data from emerging and developing Asia to highlight different aspects of household vulnerability to income shocks arising from the Covid-19 pandemic: occupation in Cambodia, self-insurance mechanisms in Nepal, and financial leverage in Vietnam. Occupation and ex-ante income levels emerge as the main drivers of vulnerability. We estimate that the pandemic could have placed an additional 6 to 9 percent of the population of each country in a vulnerable position, with the impact concentrated on urban, informal, and service sector workers. Government intervention and financial access emerge as key resilience-enhancing mechanisms.
| JEL Classification Numbers: | D14; D12 |
| Keywords: | Income shocks; Informality; Covid-19; Developing Asia |
| Author’s E-Mail Address: | adestefani@imf.org; alaws@imf.org; abalduinosollaci@imf.org |
| JEL Classification Numbers: | D14; D12 |
| Keywords: | Income shocks; Informality; Covid-19; Developing Asia |
| Author’s E-Mail Address: | adestefani@imf.org; alaws@imf.org; abalduinosollaci@imf.org |
Title Page
WORKING PAPERS
Household Vulnerability to Income Shocks in Emerging and Developing Asia: the Case of Cambodia, Nepal and Vietnam
Prepared by by Alessia De Stefani, Athene Laws and Alexandre Sollaci1
Contents
Introduction
Data
Labor market vulnerability in Cambodia
Financial vulnerability in Vietnam
Coping strategies and resilience in Nepal
Summary and policy implications
References
Appendix A: Details for Cambodia
Appendix B: Details for Vietnam
Appendix C: Details for Nepal
FIGURES
Figure 1: Distribution of Cambodian Workforce by Sector
Figure 2: Simulating the Effects of the Pandemic on the Distribution of Income
Figure 3: Simulating the Effects of the Cash Transfer
Figure 4: Demographics of Recipients vs New Poor
Figure 5: Percentage of Households Resorting to Income-Smoothing Mechanisms
Figure 6: Average Household Savings Rate
Figure 7: Debt Value Distribution and Purpose of Loans
Figure 8: Household Debt and Income
Figure 9: Financial Margin Distribution
Figure 10: Financial Services Currently Used
Figure 11: Total Loan Value and Interest Rate by Source of Finance
Figure 12: Predicted and Counterfactual FMR
Figure B.1: Loan Age and Predicted Duration
Figure B.2: FMR Density After COVID-19 Income Shock
TABLES
Table 1: Percentage of HHs Using Each Coping Strategy Following a Shock in the Preceding 12 Months
Table 2: Baseline Indicators for Vulnerability and Resilience
Table 3: Impacts of Financial Access on Shock Outcomes
Table A.1: Descriptive Statistics; Income Distribution Under Different Scenarios
Table B.1: Probability of Debt and Financial Distress
Table B.2: Determinants of Household Vulnerability
Table C.1: Household Descriptive Statistics for Nepal’s Household Risk and Vulnerability Survey (HRVS)
Table C.2: Types of Shocks Faced by Households in Nepal’s HRVS
Table C.3: Household Ex-ante Coping Strategies: “How would you respond to a shock of NRs25,000 (approx. US$210)?”
We would like to thank Alejandro Badel, Era Dabla-Norris, Laura Jaramillo Mayor, Yasuhisa Ojima, Alasdair Scott, and participants in the APD/Developing Economies Group seminar for useful comments.