Title: Precautionary Saving from Different Sources of Income: Evidence from Rural Pakistan
Abstract: No AccessPolicy Research Working Papers25 Jun 2013Precautionary Saving from Different Sources of Income: Evidence from Rural PakistanAuthors/Editors: Adams H. Jr. RichardAdams H. Jr. Richardhttps://doi.org/10.1596/1813-9450-2761SectionsAboutPDF (0.1 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In Abstract:Much of past literature has assumed that households in developing countries save at the same marginal rate from all sources of income. But in rural Pakistan households save at very different marginal rates from different sources of income. The marginal propensity to save from those sources of income that are more variable and uncertain—like external remittances—is much higher than from those sources of income that are more predictable—like rental income. Few studies have tried to measure how households in a developing country save from each of the different income sources at their disposal. To help fill that gap, Adams uses five-year panel data to examine how households in rural Pakistan save from each of seven separate sources of income. Adams finds that households save from different sources of income at significantly different marginal rates. For example, the marginal propensity to save from external remittances (0.711) is much higher than that for rental income (0.085). As the precautionary model of saving suggests, the reasons for this relate to uncertainty: income that is more variable tends to be saved at a higher marginal rate. Faced with incomplete capital and credit markets, households in rural Pakistan save "for a rainy day" by putting away mainly those sources of income that are more variable and uncertain. This paper—a product of the Poverty Reduction Group, Poverty Reduction and Economic Management Network—is part of a larger effort in the network to understand how households use savings for investment and development in developing countries. The author may be contacted at [email protected] Previous bookNext book FiguresReferencesRecommendedDetailsCited ByRemittances: Loan Funds for a Rural Economy? Evidence from the Kayes District (Western Mali)16 July 2019Fee pressure and audit qualityAccounting, Organizations and Society, Vol.39, No.4AIA submission: CEO overconfidence and the incidence of financial restatementAdvances in Accounting, Vol.29, No.1Financial restatements and Sarbanes–Oxley: Impact on Canadian firm governance and management turnoverJournal of Corporate Finance, Vol.21The Impact of Migrant Remittances on Economic Growth: Evidence from South AsiaReview of International Economics, Vol.20, No.519 October 2012Remittances and Household Behavior in the PhilippinesSSRN Electronic JournalInformation asymmetry, speculation and foreign trading activity: Emerging market evidenceInternational Review of Financial Analysis, Vol.17, No.4Senior Citizens' Acceptance of Information Systems: A Study in the Context of e-Government ServicesIEEE Transactions on Engineering Management, Vol.53, No.4 View Published: January 2002 Copyright & Permissions Related RegionsSouth AsiaRelated CountriesPakistanRelated TopicsRural DevelopmentMacroeconomics and Economic GrowthPoverty ReductionPrivate Sector DevelopmentFinance and Financial Sector Development KeywordsBANKBUDGETCONSUMERCONTRIBUTIONSECONOMIC DEVELOPMENTHOUSEHOLD SAVINGINCOME SOURCEINCOME SOURCESINCOMESINFORMATIONLIFETIMEMARGINAL RATEMARGINAL RATESPRECAUTIONARY SAVINGRATE OF INTERESTREGRESSION ANALYSISSAVERSAVING BEHAVIORSAVINGSSOURCES OF INCOME PDF DownloadLoading ...