Household Savings and Portfolio Choices in Developing Countries: The Impact of Ill-Health, Income Uncertainty, and Credit Constraints

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9809281 Kochar This research analyzes the determinants of the savings and portfolio decisions of households in developing economies, using household data from rural Pakistan. While there is a body of high quality research on this topic, this project will extend this literature in a number of important dimensions. First, while much of the existing literature focuses on the effects of crop income volatility on savings, this research recognizes that households face several other equally important sources of risk. It will distinguish one such source, the illness of household members, and contrast the effect of ill-health on savings to that of income volatility attributable to other sources. Second, it will develop estimates of the uncertainty in individual incomes and use these to investigate the responsiveness of savings to such uncertainty. Third, it will analyze the role of credit market imperfections in explaining portfolio choices. Finally, it proposes to unify the literature on the economic role of the household with the savings literature, by allowing the determinants of savings to vary across households distinguished by structure. ??