ABSTRACT
By level, the shock may be classified into two broad categories such as covariate shock and idiosyncratic shock. We investigate these two shocks separately. The former shock has a wider impact being mainly due to natural hazards such as earthquake, flood, high tidal surge/wave, cyclone, tornado, drought, crop pests or diseases, storms and epidemics that can possibly affect an entire community [World Food Program (2004) ]. Under the impact of these shocks, houses are destroyed and people and livestock are killed and an entire community is affected. For instance, suffering and wide economic disruption were caused by the unprecedented floods of 1998. Besides deaths
affected communities unable to improve their livelihoods, support economic growth or reduce poverty. Similarly, devastatingly high rainfall caused by a depression in the Bay of Bengal in 2006 has affected thousands of fishermen. Idiosyncratic shocks do not directly affect all members of a community but are likely to affect on an individual or household level. These shocks are attributable to one or more factors operating individually or simultaneously [World Food Program (2004)]. The most harmful idiosyncratic shocks include illness, dacoity/theft, livestock death, the death of a main earner in a household, loss of employment, eviction from land, or large medical expenditure etc.
