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Income Smoothing and Consumption Smoothing

Income Smoothing and Consumption Smoothing Abstract One way that risk-averse households protect consumption levels is to borrow and use insurance mechanisms. Another way, common in low-income economies, is to diversify economic activities and make conservative production and employment choices. Households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance. Typically, both types of mechanisms are studied independently but much more can be learned by studying them together. First, we obtain a more complete picture of risks, costs, and insurance possibilities. Second, it opens the way to considering biases in standard tests of credit and insurance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Perspectives American Economic Association

Income Smoothing and Consumption Smoothing

Journal of Economic Perspectives , Volume 9 (3) – Aug 1, 1995

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References (20)

Publisher
American Economic Association
Copyright
Copyright © 1995 by the American Economic Association
Subject
Symposia
ISSN
0895-3309
DOI
10.1257/jep.9.3.103
Publisher site
See Article on Publisher Site

Abstract

Abstract One way that risk-averse households protect consumption levels is to borrow and use insurance mechanisms. Another way, common in low-income economies, is to diversify economic activities and make conservative production and employment choices. Households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance. Typically, both types of mechanisms are studied independently but much more can be learned by studying them together. First, we obtain a more complete picture of risks, costs, and insurance possibilities. Second, it opens the way to considering biases in standard tests of credit and insurance.

Journal

Journal of Economic PerspectivesAmerican Economic Association

Published: Aug 1, 1995

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