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Journal of Economic Perspectives: Vol. 9 No. 3 (Summer 1995)
JEP Volume. 9, Issue 3 | 
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Income Smoothing and Consumption Smoothing
Article Citation
Morduch, Jonathan. 1995. "Income Smoothing and Consumption Smoothing."
Journal of Economic Perspectives,
9(3): 103-114.
DOI: 10.1257/jep.9.3.103
DOI: 10.1257/jep.9.3.103
Abstract
One way that risk-averse households protect consumption levels is to borrow and use insurance mechanisms. Another way, common in low-income economies, is to diversify economic activities and make conservative production and employment choices. Households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance. Typically, both types of mechanisms are studied independently but much more can be learned by studying them together. First, we obtain a more complete picture of risks, costs, and insurance possibilities. Second, it opens the way to considering biases in standard tests of credit and insurance.
Article Full-Text Access
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Authors
Morduch, Jonathan (Harvard U)
JEL Classifications
O12: Microeconomic Analyses of Economic Development
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