Most studies examining the dynamics of welfare have found large fluctuations in consumption over relatively short periods, suggesting substantial short-run movements in and out of poverty. The consequence is that cross-section poverty research may not be able to identify the poor. In this study, we explore this short-run variability further. We use a data set on a panel of 1450 households in different communities in rural Ethiopia, surveyed thrice, over 18 months. On average year-to-year poverty is very similar. However, we find high variability in consumption and poverty, over the seasons and year-by-year. Econometric analysis suggests that consumption is affected by idiosyncratic and common shocks, including rainfall and household-specific crop failure, while households respond to seasonal incentives related to changing labour demand and prices. The results imply that a larger number of households are vulnerable to shocks than implied by the standard poverty statistics, while some of the non-poor in these statistics are in fact otherwise poor households temporally boosting their consumption as an optimal response to changing seasonal incentives.

The increased adoption of fertiliser and improved seeds are key to raising land productivity in Ethiopian agriculture. However the adoption and diffusion of such technologies has been slow. We use data from the Ethiopia between 1999-2009 to examine the role of learning from extension agents versus neighbours for both improved seeds and fertiliser. We use the structure of spatial networks of farmers and panel data to identify these influences and find that while the initial impact of extension agents was high, the effect wore off, in contrast to learning from neighbours.

To investigate risk-sharing within the household, we model nutritional status as a durable good and we look at the consequences of individual health shocks. For household allocation to be pareto-efficient, households should pool shocks to income. We also investigate whether households can smooth nutritional levels over time. Using data from rural Ethiopia on adult nutritional status, we find that poor households are affected by idiosyncratic agricultural shocks, while richer households are more successful in smoothing nutritional levels. All individuals adjust to predictable changes in earnings and the nutritional status of poor individuals is responsive to seasonal food price fluctuations. Poor southern households are not sharing risk; women in these households bear the brunt of adverse shocks. Finally, we look at the role of inside and outside options in determining the intrahousehold allocation of nutrition of married couples. We find that wives' relative position improves with a smaller age gap between partners, in younger marriages, as well as by favourable customary laws on settlements upon divorce-but the most important variable affecting allocation is household wealth. Foster employs a model of intertemporal resource allocation under liquidity constraints and examines the ability 2 of households to smooth consumption (or more indirectly, the anthropometric well-being of the children) over time. He finds that changes in health outcomes were influenced by liquidity constraints linked to credit market imperfections. Pitt, Rosenzweig and Hassan (1990) examine the impact of higher endowments on nutrient intakes. They find 3 that higher endowments increase nutrient intakes only for men and not women. That is, households seem to allocate more resources to members with better health endowments, who are more likely to work at energy-intensive activities which pay relatively high wages.

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