Transitory Income Changes and Consumption Smoothing: Evidence from Mexico

Arbeitspapier

We study how 3,534 beneficiaries of PROSPERA, Mexico's cash transfer program, smooth food consumption around the transfer payday, an anticipated and transitory income shock. We find that food consumption and food security do not change around the transfer payday, including for recipients with impatient or time-inconsistent preferences and households with higher than median transfer dependence. Conversely, health and employment shocks (unexpected and less transitory income changes) reduce food security. The transfer's relative illiquidity may act as a commitment device, helping time-inconsistent and less experienced debit card holders smooth consumption.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 14452

Classification and Topics

• Classification: Wirtschaft ; Consumer Economics: Empirical Analysis ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Macroeconomics: Consumption; Saving; Wealth ; Health Behavior ; Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
• Subject: consumption smoothing ; permanent income hypothesis ; payday

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Angelucci, Manuela ; Chiapa, Carlos ; Prina, Silvia ; Rojas, Irvin
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/236483
• Last update: 10.03.2025, 11:42 AM CET