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Are poor people credit-constrained or myopic? Evidence from a South African panel

Erlend Berg

Journal of Development Economics, 2013, vol. 101, issue C, 195-205

Abstract: Credit constraints are an almost ubiquitous assumption in development economics. Yet direct evidence for credit constraints is limited, and many observations consistent with credit constraints are equally compatible with myopic (non-forward-looking) consumption or precautionary saving. Using household panel data and a source of widely anticipated income in South Africa, this paper tests and rejects the standard consumption model with perfect capital markets. Then, myopic consumption and precautionary saving are tested as alternative explanations for the observed jumps in expenditure. The standard model with credit constraints cannot be rejected in favour of myopic consumption or precautionary saving.

Keywords: Credit constraints; Household consumption (search for similar items in EconPapers)
JEL-codes: D91 H55 O12 O16 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1016/j.jdeveco.2012.10.002

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Handle: RePEc:eee:deveco:v:101:y:2013:i:c:p:195-205