Do shocks have a persistent impact on consumption?

This article uses rural Malawian data to study the long-run impact of two household shocks (sickness and death) and two community shocks (floods and drought) on household per capita consumption. Little work has been done in this area, but understanding these shocks and the extent to which households can insulate themselves against these shocks is important in understanding how households in developing countries remain in a poverty trap. Results indicate that drought and sickness have negative short-term effects on consumption level, but do not have significant long-run effects. This suggests that rural Malawian households are able to shield themselves from the persistent negative impacts of these shocks on consumption levels but are unable to self-insure against the short-run impact.