Savings Behavior of Rural Farm Households: A Case Study of Coastal Andhra Pradesh

Paramaiah Ch and S K V S Raju

The IUP Journal of Financial Economics, 2007, vol. V, issue 1, 43-60

Abstract: This paper examines the determinants of rural farm households’ savings behavior in the coastal districts of Andhra Pradesh. This study divides the formulation of models into two groups; an analysis of household saving behavior mainly based on the formulations using the Absolute Income Hypothesis; and testing of the Permanent Income Hypothesis and Normal Wealth Hypothesis. The results show that among different farm size groups, the big farm households saved 81% of their transitory income, while the marginal farm households saved only 64% of their transitory income. The results indicate that there is no direct relationship between the size of the farm and the proportion of savings out of the transitory income. A comparison of the estimated results for the study area—of the developed West Godavari district, moderately developed Srikakulam district, and the developing Prakasam district—indicate that the normal wealth formulation is neither superior nor inferior to the current wealth formulation in terms of predicting the saving behavior of the households.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjfe:v:05:y:2007:i:1:p:43-60

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