Individuals face numerous natural, market, and institutional risks in generating livelihoods. In recent years, a number of studies have explored the strategies by which individuals in developing countries adapt to this uncertainty. Such studies show that households generally have smoother consumption than income and, further, that they have smoother income than what a risk-neutral agent would achieve. 1

People insulate their consumption from income fluctuations in different ways. These range from informal community risk sharing to participating in insurance and credit markets when such opportunities exist. 2 They also use saving and spending arrangements. 3 Keeping cattle as an insurance substitute has long-standing importance in the economic literature on Africa. 4 N. Jodha and M. Rosenzweig and K. Wolpin provide evidence that livestock sales and purchases are used as part of farm households’ consumption-smoothing strategies. 5 Households may also use income diversification and remittances to manage risk. 6 Individuals and communities participate in a variety of institutions (such as sharecropping) that sacrifice static allocative efficiency in order to manage risk over time. Transfers and remittances also provide implicit insurance networks among families and friends. 7 Consumption smoothing can involve important costs to households that could lead to a differentiated ability to smooth among different segments of the population. J. Jalan and M. Ravallion bring empirical evidence from rural