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American Economic Review: Vol. 102 No. 3 (May 2012)

AER Volume. 102, Issue 3 | Previous ArticleNext Article

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Village Economic Accounts: Real and Financial Intertwined

Article Citation

Paweenawat, Archawa, and Robert M. Townsend. 2012. "Village Economic Accounts: Real and Financial Intertwined." American Economic Review, 102(3): 441-46.

DOI: 10.1257/aer.102.3.441

Abstract

We propose a framework to create village economic and balance of payments accounts from a micro-level household survey. Using the Townsend Thai data, we create the accounts for villages in rural and semi-urban areas of Thailand. We then study these village economies as small open countries, exploring in particular the relationship between the real and financial variables. We examine cross-village risk-sharing and the Feldstein-Horioka puzzle. Our results suggest that within-village risk-sharing is better than across-village and, while there is smoothing in both, the mechanisms are different. We also find that, unlike countries, the cross-village capital markets are highly integrated.

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Authors

Paweenawat, Archawa (U Thai Chamber of Commerce)
Townsend, Robert M. (MIT)

JEL Classifications

O18: Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
D14: Personal Finance
E44: Financial Markets and the Macroeconomy
O12: Microeconomic Analyses of Economic Development
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance