Seasonality, precautionary savings and health uncertainty: Evidence from farm households in central Kenya

Lydia Ndirangu, Kees Burger, Henk AJ Moll and Arie Kuyvenhoven

African Journal of Agricultural and Resource Economics, 2010, vol. 05, issue 2, 13

Abstract: The high prevalence of risks in low income economies makes managing uncertainty critical for productivity and survival. This paper analyzes seasonal changes in farm households’ per capita consumption and saving in response to weather and health shocks. Using a sample of 196 households in central Kenya, it tests the notion that people save most of their transitory income, and examines their precautionary saving motives. The results show that the propensity to save out of transitory income is about a fifth of what the permanent income hypothesis postulates. The propensity to save differs by wealth, with the poor exhibiting stronger precautionary motives towards rainfall variability. But the wealth effect is weak, suggesting that the asset base is vulnerable even for the better-off. However, precautionary savings tend to increase with wealth among HIV/AIDS affected households. Since illness is associated with higher consumption, and therefore less investment, we find more volatile consumption for HIV/AIDS affected households.

Keywords: Consumer/Household Economics; International Development (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/156670/files/5 ... 0al.%20-%20FINAL.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:afjare:156670

DOI: 10.22004/ag.econ.156670

Access Statistics for this article

More articles in African Journal of Agricultural and Resource Economics from African Association of Agricultural Economists Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().