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The Use of Remittances and Asset Accumulation in Consumption Smoothing: Evidence from Village India

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  • Seiler, Edward J.

Abstract

In this study we examine consumption smoothing in three low-income Indian villages by testing the empirical implications of a multi-period risk sharing framework with borrowing constraints. We investigate three main issues: the targeting of remittances to liquidity constrained households; the relationship between remittances and four types of asset accumulation (the purchase of physical assets, increased stock inventory, increased money holdings and the accumulation of financial assets); and the relationship between remittances and demographic variables, such as income, age, sex, marital status and education. Our results suggest that remittances are not particularly targeted to liquidity constrained households (except in the village of Aurepalle); that there is a positive relationship between asset accumulation and remittances - although this pattern differs across villages; and that household income is inversely related to remittances.

Suggested Citation

  • Seiler, Edward J., 1998. "The Use of Remittances and Asset Accumulation in Consumption Smoothing: Evidence from Village India," Working Papers 232810, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
  • Handle: RePEc:ags:huaewp:232810
    DOI: 10.22004/ag.econ.232810
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    File URL: http://ageconsearch.umn.edu/record/232810/files/hebrewuniv-workingpapers-9812.pdf
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    References listed on IDEAS

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    1. Youngjae Lim & Robert Townsend, 1998. "General Equilibrium Models of Financial Systems: Theory and Measurement in Village Economies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 59-118, January.
    2. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    3. Cox, Donald C & Jimenez, Emmanuel, 1992. "Social Security and Private Transfers in Developing Countries: The Case of Peru," World Bank Economic Review, World Bank Group, vol. 6(1), pages 155-169, January.
    4. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    5. Seiler, Edward J., 1998. "Consumption Smoothing in Village Economies: Intra-Temporal Versus Inter-Temporal Smoothing Mechanisms," Working Papers 232808, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    6. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    7. Hanan G. Jacoby & Emmanuel Skoufias, 1998. "Testing Theories of Consumption Behavior Using Information on Aggregate Shocks: Income Seasonality and Rainfall in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 1-14.
    8. Robert M. Townsend, 1995. "Financial Systems in Northern Thai Villages," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1011-1046.
    9. Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 169-215.
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    Cited by:

    1. Seiler, Edward J., 1998. "Consumption Smoothing in Village Economies: Intra-Temporal Versus Inter-Temporal Smoothing Mechanisms," Working Papers 232808, Hebrew University of Jerusalem, Center for Agricultural Economic Research.

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    International Development;

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