The importance of the savings device in precautionary savings: Empirical evidence from rural Bangladesh |
| |
Authors: | Jeffrey D Michler Joseph V Balagtas |
| |
Institution: | 1. Department of Agricultural and Consumer Economics, University of Illinois, Urbana, IL, USA;2. Department of Agricultural Economics, Purdue University, West Lafayette, IN, USA |
| |
Abstract: | We test if precautionary behavior in the consumption decisions of rural households differs across the forms of savings. Using monthly panel data from Bangladesh, we find that, on average, the savings device does not matter but that the effect of income on savings indeed depends on the savings device. Precautionary savings in the form of staple grain are relatively constant across income quartiles, while nongrain precautionary savings vary across income quartiles. Previous studies, which treat these two types of savings devices as fungible, misdiagnose the reasons for, and by extension the market failures behind, a large percentage of the precautionary savings held by rural households. |
| |
Keywords: | D12 D91 O12 Q10 Precautionary savings Grain storage Consumption smoothing Rural Bangladesh |
|
|