Does Household Consumption Behave as a Martingale? A Test for Rural South India
AbstractThe hypothesis that consumption evolves over time as a martingale process is tested on household panel data for three villages in South India. A novel feature of the methodology is that it gives consistent estimates of dynamic effects in short panels. The estimated coefficients of lagged consumption are generally smaller than unity and a number of the lagged income and wealth variables are statistically significant. The results are inconsistent with the proposition that consumption equals permanent income. This is also true when the data are disaggregated by household wealth. Copyright 1993 by MIT Press.
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Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics & Statistics.
Volume (Year): 75 (1993)
Issue (Month): 3 (August)
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- Morduch, Jonathan, 2002. "Consumption Smoothing Across Space: Testing Theories of Risk-Sharing in the ICRISAT Study Region of South India," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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- Sandra Freire, 2004. "Funeral Costs, Saving Behaviour and HIV/AIDS," Cahiers de la Maison des Sciences Economiques bla04092, Université Panthéon-Sorbonne (Paris 1).
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