Income Smoothing and Consumption Smoothing

摘要: One way that risk-averse households protect consumption levels is to borrow and use insurance mechanisms. Another way, common in low-income economies, diversify economic activities make conservative production employment choices. Households thus tend toward limiting exposure only shocks can be handled with available credit insurance. Typically, both types of mechanisms are studied independently but much more learned by studying them together. First, we obtain a complete picture risks, costs, possibilities. Second, it opens the considering biases standard tests