Title: Consumption Smoothing and Household Savings in India: Role of Demographics and Durables
Discussant: Bent Sorensen

We conducted the 20th Consumer Pyramids Research Seminar on 26th May 2022 at 6.30 PM IST.

Event Summary

Neha Bairoliya from University of Southern California and Areendam Chanda from Louisiana State University presented their paper on household consumption and savings in India. The paper was co-authored by Jingyi Fang from University of Southern California. Around 80 participants were in attendance. The audience contributed over 20 questions, all of which were answered by Areendam Chanda throughout the presentation.

The authors presented their work on estimating life-cycle profiles of consumption, income, and savings rates for Indian households, using the CPHS dataset. A semi-parametric linear regression model was employed to investigate the effect of age, time, and birth cohort on consumption, income, and savings. The authors also investigated consumption and savings profile of sub-groups, by occupation, family type, and region. The results were benchmarked with findings from the US.

Indian households were found to have comparable growth in life-cycle consumption. However, the authors observed a flat consumption profile when the data was adjusted for family size. They discussed various possible explanations behind this interesting trend. Further investigation revealed that the need for lumpy investments in housing, cars, tractors, and cattle seems to drive the flat consumption profile and high savings rate. The presentation also covered robustness checks for the overlap of head of the household and primary earner, production for self-consumption, and alternate model specifications.

Bent Sorensen from University of Houston served as discussant for the paper. The main finding of the paper was noted as an interesting stylized fact with significance in studying saving behaviour in India. Sorensen provided detailed feedback on the regression model used in the study and on the structure of the paper. He highlighted the benefits of further exploiting the panel nature and large sample size of the CPHS dataset. Sorensen also discussed the potential in investigating the role of income shocks and how this may impact the interpretation of the paper’s findings.

The session ended with the authors responding to some of the key points raised by Sorensen. The authors also noted the potential in further long-term research on consumption smoothing of Indian households.

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