Seminar ISER External Seminars
Transitory Income Changes and Consumption Smoothing: The PIH holds
- Date and time
- Starts: Ends:
- Location
- https://essex-university.zoom.us/j/92598831060 Please note that this event is open to everyone, but those who are not members of University of Essex need to register by simply sending their names to iserseminars@essex.ac.uk.
- Presented by
- Silvia Prina (Northeastern University)
We test the permanent income hypothesis (PIH) on 3,500 beneficiaries of PROSPERA, Mexico’s anti-poverty program, by looking at consumption and expenditure patterns one week before and after the pay date. Consistent with the PIH, food security and food consumption do not decrease before the transfer paydate (a transitory and anticipated income change), regardless of the transfer’s size. Households smooth consumption by changing labor supply and the paydate of labor earnings to be negatively correlated with the PROSPERA transfer. Also consistent with the PIH, health and employment shocks (unexpected, and less transitory income changes) reduce food security and consumption. Being about to receive a PROSPERA transfer also improves healthy habits and mental health, while the unexpected shocks have statistically lower effects on these outcomes.