The importance of the savings device in precautionary savings: Empirical evidence from rural Bangladesh

Jeffrey D. Michler, Joseph V. Balagtas

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

We test if precautionary behavior in the consumption decisions of rural households differs across the forms of savings. Using monthly panel data from Bangladesh, we find that, on average, the savings device does not matter but that the effect of income on savings indeed depends on the savings device. Precautionary savings in the form of staple grain are relatively constant across income quartiles, while nongrain precautionary savings vary across income quartiles. Previous studies, which treat these two types of savings devices as fungible, misdiagnose the reasons for, and by extension the market failures behind, a large percentage of the precautionary savings held by rural households.

Original languageEnglish (US)
Pages (from-to)129-141
Number of pages13
JournalAgricultural Economics (United Kingdom)
Volume48
Issue number2
DOIs
StatePublished - Mar 1 2017
Externally publishedYes

Keywords

  • Consumption smoothing
  • Grain storage
  • Precautionary savings
  • Rural Bangladesh

ASJC Scopus subject areas

  • Agronomy and Crop Science
  • Economics and Econometrics

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