Consumption under uncertainty: Empirical evidence from rural Pakistan

Desai, Parul B.

     The objective of this thesis is to examine the evidence for complete markets in Pakistani villages. Testable implications for household consumption are derived under complete markets for seasonal preferences. Using Pakistan Rural Survey Data for 714 households, I implement complete market tests for Pakistani villages. Econometric model is developed to estimate diosyncratic component of household income. Empirical tests are developed to measure a response of household consumption to idiosyncratic component of household income, after controlling for demographic factors, and seasonality in preferences.
     The complete markets hypothesis is rejected for Pakistan Rural Survey Data, where household consumption is shown to be responsive to current income and idiosyncratic component of income. My analysis also reveals that a significant amount of smoothing is done out of livestock income and livestock sales.

Johnson, D. Gale