Does a Debt Relief Lead to Increased Precautionary Savings?: Evidence from A Policy Experiment

48 Pages Posted: 9 Feb 2016 Last revised: 21 Aug 2017

See all articles by Mrinal Mishra

Mrinal Mishra

affiliation not provided to SSRN

Venkatesh

Indian School of Business (ISB), Hyderabad

Prasanna L. Tantri

Indian School of Business

Nagaraju Thota

BITS-Pilani Hyderabad Campus

Date Written: May 30, 2017

Abstract

Using official national-level survey data, we investigate the impact of a large debt waiver program in India on beneficiaries savings and consumption. We find that the household consumption level and pattern are unaffected by the waiver. Plausibly anticipating higher credit constraints in the post-waiver period, the households increase precautionary savings as represented by increased investment in jewelry. The arbitrary program eligibility cut-off, defined in terms of landholdings, allows us to employ a robust regression discontinuity design. We perform several placebo and robustness tests in order to rule out alternative explanations.

Keywords: Consumption and Savings, Governmental Policy and Regulation, Banks, Bankruptcy, Political Economy

JEL Classification: E21, G18, G20, G33, P26, G21, G28, G30, G38, L51, M52

Suggested Citation

Mishra, Mrinal and K, Venkatesh and Tantri, Prasanna L. and Thota, Nagaraju, Does a Debt Relief Lead to Increased Precautionary Savings?: Evidence from A Policy Experiment (May 30, 2017). Indian School of Business WP 2729653, Available at SSRN: https://ssrn.com/abstract=2729653 or http://dx.doi.org/10.2139/ssrn.2729653

Mrinal Mishra

affiliation not provided to SSRN

Venkatesh K

Indian School of Business (ISB), Hyderabad ( email )

Hyderabad, Gachibowli 500 019
India

Prasanna L. Tantri (Contact Author)

Indian School of Business ( email )

Hyderabad, Gachibowli 500 032
India
9160099959 (Phone)

Nagaraju Thota

BITS-Pilani Hyderabad Campus ( email )

Shameerpet
Medchal
Hyderabad, 500078
India

HOME PAGE: http://universe.bits-pilani.ac.in/Hyderabad/thotanagaraju/profile

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