Are poor households liquidity-constrained or myopic? Evidence from South African panel data
نویسنده
چکیده
Liquidity constraints are an almost ubiquitous assumption in development economics. Yet the direct evidence for liquidity constraints is limited, and many observations consistent with liquidity constraints are equally compatible with precautionary saving or a lack of forward planning. Using household panel data and a source of widely anticipated income in South Africa, this paper tests and rejects the standard consumption model with perfect capital markets. Further analysis uses an anticipated decrease in income to contrast liquidity constraints with myopic consumption as a possible explanation. The standard model enriched with liquidity constraints cannot be rejected in favour of precautionary saving or myopic consumption.
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