AEDE Applied Economics Seminar presented by Irvin Rojas, Center for Research and Teaching in Economics (CIDE), Mexico
Irvin Rojas, Assistant Professor at Center for Research and Teaching in Economics (CIDE), Mexico, will present "Income Changes and Consumption Smoothing: The PIH holds" on Friday, September 6th from 10:30AM-12:00PM in Room 250A, Agricultural Administration Building (2120 Fyffe Road, Columbus, OH 43210). This event is sponsored by the AEDE Graduate Student Association and is open to the public. RSVPs are not required. Light refreshments will be served prior to the presentation beginning at 10:00AM.
Abstract: We test the permanent income hypothesis (PIH) on a sample of about 3,500 beneficiaries of the PROSPERA cash transfer, Mexico's anti-poverty conditional cash transfer program, by looking at consumption and expenditure patterns one week before and after the pay date. Consistent with the PIH, the bimonthly transfer - a positive, anticipated, and transitory income change, does not change food security, food consumption, and the purchase of temptation goods and of assets for the average households as well as for households in the top quartile of the transfer dependence ratio and present-biased recipients. This behavior may be caused by the relative illiquidity of the transfer, deposited into savings accounts: higher density of bank branches increases consumption of perishable goods after a pay date. Also consistent with the PIH, health and employment shocks - negative, unexpected, and less transitory income changes, reduce food security and assets.