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Economic Shocks and Savings Behavior by the Rural Poor

Author

Listed:
  • Julia Paxton

    (Ohio University)

  • Fan Zhuo

    (Boston University)

Abstract

Using data from 587 marginalized cooperative member households in rural Mexico, this paper examines how household formal financial savings fluctuates with economic shocks and other relevant variables. Regression results show that negative shocks, income, wealth, formal credit, distance from a bank branch, percent of non-working members in a household, and education have a significant influence on formal financial savings. Results from quantile regression show that the impact of negative shocks on formal savings is only statistically significant in households with a high propensity to save. These precautionary savings households not only save more, but are inclined to withdraw savings to alleviate potentially adverse personal income trends associated with the shocks.

Suggested Citation

  • Julia Paxton & Fan Zhuo, 2011. "Economic Shocks and Savings Behavior by the Rural Poor," Economics Bulletin, AccessEcon, vol. 31(4), pages 3286-3293.
    • Handle: RePEc:ebl:ecbull:eb-11-00592
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I4-P299.pdf
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    References listed on IDEAS

    as
    1. Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
    2. Lee, Jeong-Joon & Sawada, Yasuyuki, 2010. "Precautionary saving under liquidity constraints: Evidence from rural Pakistan," Journal of Development Economics, Elsevier, vol. 91(1), pages 77-86, January.
    3. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
    4. George-Marios Angeletos & David Laibson & Andrea Repetto & Jeremy Tobacman & Stephen Weinberg, 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer.
    5. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January.
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    Cited by:

    1. Marcela Ibanez & Sebastian O. Schneider, 2023. "Income Risk, Precautionary Saving, and Loss Aversion – An Empirical Test," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2023_06, Max Planck Institute for Research on Collective Goods.
    2. Marcela Ibanez & Sebastian O. Schneider, 2021. "Income Risk, Precautionary Saving, and Loss Aversion – An Empirical Test," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2021_06, Max Planck Institute for Research on Collective Goods.
    3. Robert Lensink & Roselia Servin & Marrit Berg, 2017. "Do Savings and Credit Institutions Reduce Vulnerability? New Evidence From Mexico," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(2), pages 335-352, June.

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    More about this item

    Keywords

    Mexico; precautionary savings; quantile regression;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • D1 - Microeconomics - - Household Behavior

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