Topic
Consumption smoothing
About: Consumption smoothing is a research topic. Over the lifetime, 1194 publications have been published within this topic receiving 42553 citations.
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TL;DR: In this paper, the authors tested the full insurance model using data from three poor, high risk villages in the semi-arid tropics of southern India and found that household consumptions are not much influenced by contemporaneous own income, sickness, unemployment, or other idiosyncratic shocks.
Abstract: The full insurance model is tested using data from three poor, high risk villages in the semi-arid tropics of southern India. The model presented here incorporates a number of salient features of the actual village economies. Although the model is rejected statistically, it does provide a surprisingly good benchmark. Household consumptions comove with village average consumption. More clearly, household consumptions are not much influenced by contemporaneous own income, sickness, unemployment, or other idiosyncratic shocks, controlling for village consumption (i.e. for village level risk). There is evidence that the landless are less well insured than their village neighbors in one of the three villages.
1,837 citations
TL;DR: The authors studied the relationship between risk-averse households and credit and insurance in low-income economies and found that risk-avoiding households tend to limit exposure only to shocks that can be handled with available credit The authors.
Abstract: One way that risk-averse households protect consumption levels is to borrow and use insurance mechanisms. Another way, common in low-income economies, is to diversify economic activities and make conservative production and employment choices. Households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance. Typically, both types of mechanisms are studied independently but much more can be learned by studying them together. First, we obtain a more complete picture of risks, costs, and insurance possibilities. Second, it opens the way to considering biases in standard tests of credit and insurance.
1,501 citations
TL;DR: In this paper, the authors formulate and estimate a finite-horizon, structural dynamic model of agricultural investment behavior that incorporates the major features of low-income agricultural environments: income uncertainty, constraints on borrowing and rental markets, and the use of investment assets to generate income and smooth consumption.
Abstract: In this paper we formulate and estimate a finite-horizon, structural dynamic model of agricultural investment behavior that incorporates the major features of low-income agricultural environments: income uncertainty, constraints on borrowing and rental markets, and the use of investment assets to generate income and smooth consumption. The model is fit to longitudinal Indian household data on farm profits, bullock stocks, and pump sets. The estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks, agricultural profits, and welfare associated with complete markets and bullock liquidity and with second-best policies that provide assured sources of income to farmers and weather insurance.
1,304 citations
TL;DR: In this article, a significant proportion of migration in low-income countries, particularly in rural areas, is composed of moves by women for the purpose of marriage, and the authors seek to explain these mobility patterns by examining marital arrangements among Indian households.
Abstract: A significant proportion of migration in low-income countries, particularly in rural areas, is composed of moves by women for the purpose of marriage. We seek to explain these mobility patterns by examining marital arrangements among Indian households. In particular, we hypothesize that the marriage of daughters to locationally distant, dispersed yet kinship-related households is a manifestation of implicit interhousehold contractual arrangements aimed at mitigating income risks and facilitating consumption smoothing in an environment characterized by information costs and spatially covariant risks. Analysis of longitudinal South Indian village data lends support to the hypothesis. Marriage cum migration contributes significantly to a reduction in the variability of household food consumption. Farm households afflicted with more variable profits tend to engage in longer-distance marriage cum migration. The hypothesized and observed marriage cum migration patterns are in dissonance with standard models of marriage or migration that are concerned primarily with search costs and static income gains.
1,167 citations
TL;DR: In this paper, the authors investigated how rural Filipino households deal with income and expenditure shocks using original data on gifts and loans, and found that gifts and informal loans are partly motivated by consumption smoothing motives but do not serve to efficiently share risk.
Abstract: Using original data on gifts and loans, this paper investigates how rural Filipino households deal with income and expenditure shocks. Results indicate that gifts and informal loans are partly motivated by consumption smoothing motives but do not serve to efficiently share risk. Certain shocks are better insured through gifts and loans than others. Mutual insurance does not take place at the village level; rather, households receive help primarily through networks of friends and relatives. Network quality matters. Risk is shared through flexible, zero interest informal loans rather than gifts. The evidence is consistent with models of quasi-credit where enforcement constraints limit gift giving.
1,008 citations