Transitory Income Changes and Consumption Smoothing: The PIH holds
Wednesday, October 7, 7:00PM-8:30PM (New Delhi)
Speaker: Dr. Silvia Prina
Department of Economics
Abstract: We test the permanent income hypothesis (PIH) on 3,500 beneficiaries of PROSPERA, Mexico’s anti-poverty program, by looking at consumption and expenditure patterns one week before and after the pay date. Consistent with the PIH, food security and food consumption do not decrease before the transfer paydate (a transitory and anticipated income change), regardless of the transfer’s size. Households smooth consumption by changing labor supply and the paydate of labor earnings to be negatively correlated with the PROSPERA transfer. Also consistent with the PIH, health and employment shocks (unexpected, and less transitory income changes) reduce food security and consumption. Being about to receive a PROSPERA transfer also improves healthy habits and mental health, while the unexpected shocks have statistically lower effects on these outcomes. This is consistent with an anticipation effect of the good state of the world.
About the speaker: Silvia Prina, associate professor of economics, is a development economist interested in understanding the behavior of poor households for the purpose of uncovering potential strategies to improve their lives. Her first set of papers investigates how financial access, particularly via savings accounts (mobile and not) and digital credit, can affect the saving and investment behavior, networks, preferences, cognitive ability, mental health, and aspirations of the poor. A second set of papers investigates the determinants of investments in human capital and health. Her works feature rigorous empirical methods and the implementation of unique, randomized interventions to answer questions of central importance in development economics. She has been and is working on several field experiments in Mexico and Latin America, Nepal, Tanzania, Uganda, and the U.S.
Moderator: Prof. Suganya Balakumar, Lecturer (Economics), JGBS