Household Saving in LDCs : Credit Markets , Insurance and Welfare *

Some ways in which farmers in LDCs can protect their living standards against fluctuations in income are discussed. After considering the theory of consumption under uncertainty when there is no or limited borrowing, the case where some borrowing is allowed is also examined. Empirical evidence from some LDCs is used to look at (i) household borrowing and lending, their importance and timing, and their role in smoothing consumption, and (ii) the life-cycle behavior of consumption and income. The results suggest that "hump" lifecycle saving is not likely to be a very important generator of wealth in LDCs and provide further evidence on the limited role of credit markets.