Precautionary Behavior, Migrant Networks and Household Consumption Decisions: An Empirical Analysis Using Household Panel Data from Rural China

48 Pages Posted: 15 Feb 2005

See all articles by John Giles

John Giles

World Bank; IZA Institute of Labor Economics; World Bank - Development Research Group (DECRG)

Kyeongwon Yoo

Bank of Korea

Date Written: June 30, 2006

Abstract

We develop a test of precautionary behavior in the consumption decisions of rural agricultural households. Among surveyed households facing a median level of consumption risk, we find that 10 percent of savings can be attributed to a precautionary motive, and this increases to 15 percent for households with consumption per capita below the poverty line. We next use distant lags of local rainfall shocks uncorrelated with current local productivity shocks and current consumption growth to identify the potential size of long-term migrant networks outside the village, and then present evidence that precautionary saving becomes less important for both poor and non-poor households as the size of the village migrant network increases.

Keywords: Precautionary Saving, Migration, Consumption Growth, Rural China

JEL Classification: D12, D81, D91, O12, O16, O18, Q10, R23

Suggested Citation

Giles, John and Yoo, Kyeongwon, Precautionary Behavior, Migrant Networks and Household Consumption Decisions: An Empirical Analysis Using Household Panel Data from Rural China (June 30, 2006). Available at SSRN: https://ssrn.com/abstract=667104 or http://dx.doi.org/10.2139/ssrn.667104

John Giles (Contact Author)

World Bank ( email )

Washington DC
United States

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Kyeongwon Yoo

Bank of Korea ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

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