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Abstract

In this study we examine consumption smoothing in three low-income Indian villages by testing the empirical implications of a multi-period risk sharing framework with borrowing constraints. We investigate three main issues: the targeting of remittances to liquidity constrained households; the relationship between remittances and four types of asset accumulation (the purchase of physical assets, increased stock inventory, increased money holdings and the accumulation of financial assets); and the relationship between remittances and demographic variables, such as income, age, sex, marital status and education. Our results suggest that remittances are not particularly targeted to liquidity constrained households (except in the village of Aurepalle); that there is a positive relationship between asset accumulation and remittances - although this pattern differs across villages; and that household income is inversely related to remittances.

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