Consumption Smoothing in Rural Punjab in the Green Revolution Years

Pushkar Maitra

Indian Economic Review, 1998, vol. 33, issue 2, 185-196

Abstract: This paper examines how well consumption is insured against income shocks using a panel of households from rural Punjab during the green revolution years. I estimate the effects of income changes on consumption, after controlling for aggregate shocks through changes in village level consumption. By classifying households on the basis of landholding, I examine whether certain section of the population are better able to insure consumption against idiosyncratic income shocks. The null hypothesis of full insurance is universally rejected irrespective of the land holding, though there is evidence of partial insurance for all land classes. The rejection of full insurance is the strongest for landless households with around 40% of an idiosyncratic income shock being passed onto current consumption. In contrast the estimated marginal propensity to consume out of changes in idiosyncratic income is only 12% for the wealthiest households. I also find that for all households food is better protected from income shocks than total consumption and landed households are able to insure education from idiosyncratic income shocks.

JEL-codes: C33 O12 O16 (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:dse:indecr:v:33:y:1998:i:2:p:185-196

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