Are African Households Heterogeneous Agents?: Stylized Facts on Patterns of Consumption, Employment, Income and Earnings for Macroeconomic Modelers
IMF Working Papers, May 6, 2015
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- Are African Households Heterogeneous Agents?: Stylized Facts on Patterns of Consumption, Employment, Income and Earnings for Macroeconomic Modelers
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Bibliographic details
- Authors: Louise Fox
- Published: May 6, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484369968.001
Summary
- Paper reviews evidence on how households in Sub-Saharan Africa segment along consumption, income and earning dimensions relevant for quantitative macroeconomic policy models that incorporate heterogeneity.
- Emphasis on stylized facts to inform macroeconomic modelers about household behavior, vulnerability, and coping capacity.
Key findings
- Importance of home-grown food in household income and consumption:
- Home-grown food matters for households well up the income distribution.
- Lack of formal financial inclusion:
- Formal financial inclusion is lacking for all but the richest households.
- Importance of non-wage income:
- Non-wage income is an important component of household income.
- Differential exposure to shocks:
- An externally-generated macroeconomic shock and the short-term policy response would mainly affect the behavior and welfare of richer urban households, who are also more likely to have the means to cope.
- Middle class and poor households, especially in rural areas, should be insulated from these external shocks but vulnerable to a wide range of structural factors in the economy as well as idiosyncratic shocks.
Implications for macroeconomic modelers
- Model heterogeneity should account for:
- Significant role of home production (home-grown food) across income distribution.
- Limited access to formal financial instruments for most households.
- Large shares of non-wage income and informal income sources.
- Shock transmission and welfare analysis:
- External macroeconomic shocks may primarily alter outcomes for richer urban households in the short run.
- Structural and idiosyncratic shocks may be more relevant for middle class and poor households, particularly in rural areas.
- Policy-response design:
- Short-term policy responses to external shocks should consider targeting mechanisms that recognize heterogeneity in coping capacity and exposure.
- Structural policies to reduce vulnerability of rural and poor households to non-external shocks are important.
Publication and metadata
- Author: Louise Fox
- Publication date: May 6, 2015
- Series: Working Paper No. 2015/102
- Issue: 102
- Volume: 2015
- Pages: 36
- DOI: https://doi.org/10.5089/9781484369968.001
- ISBN: 9781484369968
- ISSN: 1018-5941
IMF Working Papers — Are African Households Heterogeneous Agents?: Stylized Facts on Patterns of Consumption, Employment, Income and Earnings for Macroeconomic Modelers