Income Risk, Habit Formation, and Precautionary Savings: The Case of Rural Households

Aditya Khanal and Ashok Mishra ()

No 235597, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association

Abstract: Using a panel data, we estimated Euler equation under income risks and tested for pre-cautionary saving behavior among rural households while accounting for habit formation. Our results show an evidence for significant habit formation and precautionary saving motives. In the second part of the paper, we estimated actual savings equation under weather and labor income risks among same households. We found that rural households have tendency to save more under both weather risk and labor income risk but magnitude is higher under weather risk.

Keywords: Consumer/Household Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 28
Date: 2016-05-25
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea16:235597

DOI: 10.22004/ag.econ.235597

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