INCOME,CONSUMPTION AND SAVING IN URBAN AND RURAL INDIA*

The main purpose of the study is to determine the savings potential of urban and rural households in India and in the process determine the possible savings and consumption functions separately for urban and rural areas. Four different possible functions have been used for determining the savings behaviour of the households both at the aggregate level and at the per capita level. The rural households, according to the results, have an extremely low rate of saving with income elasticity of saving of less than unity. For the urban households on the other hand, the income elasticity of saving is high enough to suggest the possibilities of considerably high savings potential. To understand the consumption behaviour of these households, the long-run and the short-run marginal propensities to consume and the marginal propensities to consume out of‘permanent’ or ‘normal’ income and ‘transitory’ income have been worked out. For the urban sector none of these give encouraging enough results and the analysis has been extended to examine whether other factors like prices and household assets are of any significance. Whereas for the rural sector, Milton Friedman's theory of ‘permanent’ or ‘normal’ income is somewhat substantiated, other factors like ‘transitory’ income, prices and assets appear to inthence urban consumption behaviour though no single one of them substantially enough. A negligible effect of ‘permanent’ income on urban consumption behaviour is, on the other hand, very clearly suggested by the results. Household consumption and savings have next been projected using the above results to determine the possible levels for the next three years. The results suggest that the rate of domestic savings likely to be achieved by the end of the Third Five Year Plan (1965–66) falls short of the targets laid down.     

经济转轨与城镇化进程中的居民消费行为特征——对1396户城镇家庭的实证分析

基于中国9个省1396户城镇家庭的面板数据,运用系统广义矩估计法对一个包括习惯形成和不确定性的欧拉方程进行估计以考察家庭消费是否跨时演进,研究结果表明,偏好的设定偏误是传统的生命周期——持久收入模型不能很好地诠释中国城镇家庭消费决策的一个原因,在解释消费决策的影响因素时假定偏好的跨时可分性会得出错误的结论,城镇居民消费偏好的跨时不可分性以及由收入和支出不确定性引发的预防性储蓄动机是导致居民消费倾向持续偏低的重要原因。     

Does urbanization reduce rural poverty? Evidence from Vietnam

This paper uses data from household surveys to contribute to the urbanization-poverty nexus literature by assessing the effect of urbanization on income, expenditure, and poverty in rural households in Vietnam. We find that the urbanization process stimulates the transition from farm to non-farm activities in rural areas. More specifically, urbanization tends to reduce farm income and increase wages and non-farm income in rural households. This suggests that total income and consumption expenditure of rural households are more likely to increase with urbanization. Finally, we find also that urbanization helps decrease the expenditure poverty rate of rural households, albeit by a small magnitude.     

Returns from income strategies in rural Poland

In order to stabilize and improve their income situation, rural households are strongly encouraged to diversify their activities both in and outside the agricultural sector. Often, however, this phenomenon takes on only moderate proportions. This article addresses issues of rural households' income diversification in the case of Poland. It investigates returns from rural households' income strategies using propensity score matching methods and extensive datasets spanning 1998–2008. Results suggest that returns from combining farm and off‐farm activities were lower than returns from concentrating on farming or on self‐employment outside agriculture. This differential is stable over time although returns from diversification have relatively improved after the accession of Poland to the European Union. This is also visible in the fact that since 2006, returns from combining farm and off‐farm activities have equalized with returns from relying solely on hired off‐farm labour, thus smoothing away the difference observed before the accession. Further, over the analysed period, households pursuing a diversification strategy performed better than those relying solely on unearned income. Finally, in general, incomes in households combining farm and off‐farm activities were higher than in those combining off‐farm income sources.     

流动性约束和不确定性状态下的预防性储蓄研究-中国城乡居民的消费特征分析

该文利用我国城乡时间序列数据,对城乡居民的消费特征做了新的探索.我们对引入预期收入增长的对数线性欧拉方程和二阶泰勒近似的欧拉方程进行了估计,结果说明,当期收入仍是决定我国居民消费的主要因素,消费的随机游走假说不成立;城镇居民比农村居民有更强的预防性储蓄动机.1990年代中期以来持续走低的收入增长率直接抑制了消费需求的增长,而仍然偏紧的流动性约束和日益增强的不确定性增大了预防性储蓄动机.     

Political uncertainty and household savings

Despite macroeconomic evidence pointing to a negative aggregate consumption response due to political uncertainty, few papers have used microeconomic panel data to analyze how households adjust their consumption after an uncertainty shock. We study household savings and expenditure adjustment from an unexpected, large-scale and rapidly evolving political shock that occurred largely in May 1989 in Beijing, China. Using monthly micro-panel data, we present evidence that a surge in political uncertainty resulted in significant temporary increases in savings among urban households in China. Households responded mainly by reducing semi-durable expenditure and frequency of major durable adjustment. The uncertainty effect is more pronounced among older, wealthier, and more socially advantaged households. We interpret our findings using existing models of precautionary behavior. By focusing on time variation in uncertainty, our identification strategy avoids many of the potential problems in empirical studies of precautionary savings such as self-selection and life-cycle effects.     

不确定性下农村家庭食品消费的"习惯形成"检验

本文利用"习惯形成"(habit formation)假说来研究中国家庭食品消费行为的特征,并首次利用1989—2006年农村家庭微观面板数据进行实证分析,从而试图给出近年来农村居民储蓄率持续偏高、消费倾向持续偏低的一种新解释。对动态面板模型的系统广义矩估计结果显示,农村居民家庭的食品消费有显著的习惯形成效应,这一效应即使在考虑了家庭的"预防性动机"之后仍然是稳健的,并且它对消费的边际影响比预防性动机更为重要。但是本文估计出的"习惯形成"参数比用总量数据得到的习惯形成参数要小。     

居民储蓄-准货币之主源

该文的主旨是探求广义货币中之准货币部分与居民储蓄行为间的关系.该文利用分析时序数据的经济计量模型,建立和估计出城乡居民的人均消费行为关系,用以推算居民的储蓄潜力.再用居民储蓄潜力来解释银行城乡储蓄总额,最后用银行城乡储蓄总额来解释广义货币中的准货币部分.建模试验结果表明,居民人均储蓄行为具有相当的规律性,而且储蓄与准货币供给之间也存在着相当稳定的关系.该文还就利率、利率差、收入及收入不确定性等因素对居民储蓄的影响,做了各种模拟试验.     

居民边际消费倾向的城乡比较——以四川省为例

消费需求是扩大内需、促避经济持续增长的根本动力。研究表明,城镇与农村居民的收入和消费之间具有长期的协整性,但城乡的协整关系不同。城乡居民的边际消费倾向表现出显著的差异性：城镇居民长期平均的边际消费倾向较稳定,而农村居民的边际消费倾向则有较大交动。因此,应根据城乡居民的消费特征,采取增加低收入阶层的收入,培育新的消费点,完善农村社会保障等措施。     

Uncertainty,inequality and consumption preferences in urban China

In this paper we present an uncertainty–inequality–consumption model and empirically investigate the effect of uncertainty on the consumption behaviors of urban households with varying levels of socio-economic status in China. We observe that the condition of households that suffered from socio-economic inequality with respect to total consumption, educational expenditures, medical expenditures, and durable consumption worsened relative to other households when faced with income uncertainty. Income uncertainty did not affect the housing consumption of households that suffered from socio-economic inequality, but it substantially decreased their ability to consume other durables. As a result of the introduction of the modern enterprise system and the reform of the housing distribution system, households with a member employed in a management position suffer larger shocks of income uncertainty in total consumption, educational expenditures, medical expenditures, and housing consumption relative to household with all members employed in worker positions in 2002. Uncertainty with respect to medical and educational expenditures had more substantial effects on the non-durables consumption of low-income households than that of other households in 2002.     

Risk insurance in a transition economy

The hypothesis of Pareto‐optimal risk‐sharing is tested in a transition economy using a new dataset of a representative sample of 364 rural households from Romania. Income shocks are identified as instances of adverse weather, crop failure, animal diseases, illness, and unemployment spells. Despite limited participation of Romanian rural households in formal insurance and credit markets, we fail to reject the hypothesis of full insurance of total non‐durable consumption and its components. Survey responses indicate that the main channels of consumption smoothing are self‐insurance (for adverse weather, crop failure and animal diseases), public transfers (for unemployment spells, maternity and childcare), and to a lesser extent, family ties. We find that adverse weather is associated with higher growth rates of non‐food expenditures. Furthermore, richer households are better able to cope with crop failure than poorer households. An alternative explanation to our not rejecting the hypothesis of full insurance is that some shocks to consumption (such as illness) play the role of preference shifters of the utility function.     

The role of sources of income and investment opportunities in rural savings

This paper investigates the effect that sources of income and investment opportunities have on the savings behavior of farm households in rural India. The panel nature of the data (agricultural years 1968–1969, 1969–1970 and 1970–1971) allows for the identification of the permanent and transitory components of a household's income. It is shown that income variability (rather than investment opportunities) can account for observed differences in the propensity to save out of different sources (agricultural/non-agricultural). A direct test of the effect of investment opportunities on savings is offered in the second part of the paper. It is observed that capital market conditions have an important effect on this relationship; poor households save more, and rich households save less, in response to an increase in investment opportunities.     

Structural Change in Rural Croatia—Is Early Retirement An Option?

Structural change in agriculture, although often connected with social hardship of uncompetitive small-scale farms and a loss of tradition, is inevitable. It is the basis for successful rural development. We discuss whether early retirement schemes (ERS) are a good value for public money in terms of the necessary adaptations of the farming sector in the course of economic development, and if they are an option for the EU candidate country Croatia. In Croatia, the small scale farm structure leads to widely uncompetitive farms. A study on farmers’ socioeconomic situation as well as actual and expected reactions to policy support is based on results of a household survey. The sample includes farm households from two Croatian regions: The peri-urban Zagreb county and the typically rural region of Bjelovar-Bilogora. Despite unfavourable economic conditions and insufficient farm incomes, rural people are often reluctant to give up farming. We present results on the age structure, income and production structure of farms and farmers’ likely reactions on ERS. We discuss incentives which push farmers to leave the farming sector and ask in which direction farm families plan their future. We conclude with a synthesis of the theoretical advantages and disadvantages of early retirement schemes and link them with possible outcomes in the Croatian case.     

Rural livelihoods in Armenia

This article explores the structure of the rural economy in Armenia from a farm household perspective. Ownership of capital and access to activities are examined on the basis of data from a recent large‐scale survey of farm households in Armenia. Different measures for the outcome of livelihood strategies in terms of well‐being are observed. Income‐poor households are found to be less well endowed especially with financial and social capital. They derive smaller income shares from economic activities and more from dissaving and social payments. The findings are relevant to policies aimed at alleviating rural poverty.     

Variations in farm consumption and their relationship to income: an empirical investigation of Illinois farm households

Empirical tests of household consumption have yielded mixed results regarding the validity of the life cycle/permanent income (LCPI) hypothesis. A significant problem with such studies is the difficulty in finding sufficient micro-level data on household expenditures. By using the recent rich quantity of such data in the Farm Business Farm Management (FBFM) data for Illinois farms from 1995 to 2009, the study reported here for farm households should provide more consistent results regarding the LCPI hypothesis. Applying an empirical model based on the LCPI hypothesis, this article identifies the determinants of farm consumption and the relationship to income. This study provides evidence that current income changes are not significant in explaining the consumption changes of farm households, thus supporting the LCPI hypothesis for farm households.     

Aggregate savings when individual income varies

This paper examines aggregate savings in a general equilibrium model where infinitely lived households face volatile (and possibly uncertain) income paths, hold a risk-free asset, and face a borrowing constraint. I first show that the equilibrium capital stock in an economy without uncertainty, but where individual income varies, can be larger than in an economy where each household's income is constant. When individual income is stochastic and uninsurable, the equilibrium capital stock is always larger than when income is constant. This additional capital accumulation has sometimes been interpreted as precautionary savings, but I argue that much of the additional savings are generated by permanent-income motives in combination with strict borrowing constraints.     

中国居民消费需求不足原因研究——基于中国城乡分省数据

This paper uses Chinese urban and rural panel data for 30 provinces, autonomous regions and municipalities (except Tibet and Taiwan) on the consumption of Chinese urban and rural households in 1995–2005, by constructiong a random effect model, to analyze the impact of sources of household’s consumption demand on the Chinese economy. The quantitative analysis reveals that the per capita disposable income of households is highly relevant in explaining households’ per capita consumption expenditure, in these eleven years, and that China’s consumption function was fairly stable. On the basis of flow of funds accounts (barter transaction) data in 1992–2004, the paper further reveals that, since 1997–1998, China’s consumer demand remains in the doldrums because of the following distribution and redistribution process of the national income: The Government’s share of total income and disposable income is becoming ever larger, while the share of households is declining. Aside from the result that a rise in the burden of personal tuition has a negative impact on per capita consumption demand for urban households, we have not found that housing reform or medical expenses significantly reduce consumer demand in China. We believe that low household consumption demand is caused mainly by the income redistribution between households, government, and corporations rather than the inequality in income distribution across households.     

Non-farm Income and Consumption Expenditures in Rural Bangladesh: Empirical Evidence from Multilevel Regression Modelling

This study examines the effects of non-farm income on household consumption expenditures in rural Bangladesh. A two-stage endogenous treatment effect model is built on data from a nationally representative Household Income Expenditure Survey (HIES) 2010 to control selection bias. The HIES follows a hierarchical data structure because the survey is based on two-stage stratified sampling. A multilevel mixed-effects linear regression model is used to capture the unobserved heterogeneity between clusters (PSUs) along with revealing important factors. Results reveal that non-farm income has a significant positive effect on household’s consumption expenditures and non-farm income recipient households spend about 29% more than their counterparts. In addition, higher level of per capita income, education, smaller family size and lower dependency ratio are found to be more effective in increasing consumption expenditures of rural households. Significant cluster-level variations are observed in the analyses. This study recommends that non-farm income generating activities should be encouraged among rural households as this would raise their consumption expenditures and hence, improve welfare and living standards among them.

     

Adding value through the mechanization of post-harvest cassava processing,and its impact on household poverty in north-eastern Zambia

This article investigates the impact of adopting a mechanized cassava processing system on household poverty levels in Zambia. An Foster, Greer and Thorbecke (FGT) poverty measure was used to compare poverty levels among households using a mechanized cassava processing system against those households using a nonmechanized process. Based on the FGT poverty measure’s specifications, a significantly lower poverty status of 49% was found among households using the mechanized process when compared to the 58% found among households using the nonmechanized process. The significant factors contributing to these differences in poverty levels include whether households are using a mechanized process or not, the number of years’ schooling among household members, the number of years’ farming experience, household income and membership of associations. The study concludes that the mechanization of cassava processing, particularly if done on the right scale, can transform primary production activities, in turn leading to higher incomes and reduced poverty levels in rural villages. Thus, policies should be introduced aimed at encouraging the promotion of mechanized post-harvest cassava processing technologies among rural households, so as to enhance crop productivity and household income levels, as well as reduce poverty among rural households.     

Determinants of household savings in China and their role in quasi‐money supply1

This study derives household saving potential empirically from econometric models of Chinese urban and rural household consumption and uses this potential to explain household bank deposits. Model simulations are performed to analyse the effects of interest rates, income and income uncertainty on the saving potential and the bank deposits. The bank deposits variable is then used to explain quasi‐money supply. High bank absorption of household savings is found to account mainly for the rapid growth in quasi‐money, which in turn explains the exceptionally high M2/GDP ratio. Households’ savings are largely predictable from their regular consumption.