Development Resilience Estimation: Theory and Applications
The past five to ten years has seen the emergence of a new term on the humanitarian and development economics landscapes, resilience. While this term holds considerable promise, international development practitioners and the academic community have yet to reach consensus on a consistent definition of resilience and few, if any, theory-based methods for estimating resilience in a development context have been developed. This dissertation introduces an econometric strategy for estimating individual or household-level development resilience from panel data and applies this strategy to two different contexts. The first, more theoretical, paper proposes a conditional moments-based approach to development resilience estimation and illustrates the method empirically using household panel data from pastoralist communities in northern Kenya. The results demonstrate not only the method and its potential as a targeting tool for resilience-building interventions, but also help explain the behavioral paradox of apparent herd overstocking in pastoral communities. The second paper of the dissertation applies the development resilience approach to evaluate the impact of an index insurance product on resilience. Taking advantage of an experimental, multi-round, household panel dataset, the paper employs an instrumental variable approach to evaluate the impact of an index-based livestock insurance product in Northern Kenya on development resilience in terms of both household herd size, the primary productive asset in the region, and child health. The results indicate that index-based livestock insurance increases household resilience to drought in terms of household livestock holdings. Insurance is also associated will substantially higher nutritional resilience in the children of drought-affected households. The final paper of the dissertation evaluates the empirical relationship between livelihood diversification—both on-farm crop diversification and income diversification—and well-being, measured as monthly household expenditures per adult equivalent, in rural Uganda. Results indicate that income diversification is negatively associated with resilience. Crop diversification is associated with increased resilience, but only when considering poverty thresholds above the rural absolute poverty line. Diversification into cash crops and non-farm income does not increase resilience. These results indicate that crop diversification (although not diversification into cash crops) should be considered in similar contexts as a tool for increasing resilience, although not necessarily for the poorest households. More generally, it demonstrates the importance of applying a development resilience approach when evaluating the potential benefits of risk management strategies and resilience-building activities.