2FOOD INSECURITY AND THE EVOLUTION OF INDIGENOUS RISK-SHARING INSTITUTIONS IN THE SAHEL By

In semi-arid Africa, income fluctuations pose a critical problem of food security for rural households. In the absence of complete insurance markets, households have developed a broad range of market and non-market institutions to smooth their consumption. Standard neoclassical economic theories predict that in the presence of a complete market for state-contingent claims, transfers are made across individuals so that individual consumption responds to aggregate income shocks only. A formal test of the perfect risk-sharing was conducted using household panel data from Burkina Faso. The null hypothesis of perfect risk-sharing was rejected at the 5 percent significance level. Further statistical analyses were undertaken to classify households along a consumption scale. Results also showed that extended households offer better insurance coverage than nuclear households by state-contingent contracts and intertemporal transfers, 3and that family labor and the size of livestock herd are positively correlated with the household’s level of food consumption. Starting from a situation where all nuclear households are organized in extended households, the current picture of agro-pastoral economies displays an apparent disfunctional social insurance scheme