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Citation Information

Type Working Paper - Tokyo, Japan: Institute of Economic Research, Tokyo
Title Intertemporal Choice and Inequality in Low-Income Countries: Evidence from Thailand, Pakistan, and India
Publication (Day/Month/Year) 2009
URL http://www.isid.ac.in/~pu/conference/dec_09_conf/Papers/TakashiKurosaki.pdf
It is well known that within-cohort consumption inequality increases with age in
developed countries. This pattern is consistent with the permanent income hypothesis,
according to which households smooth consumption through credit markets in the
short run against transient shocks and in the longer run over the life cycle. This paper
provides evidence regarding the age effects in within-cohort inequality for several lowincome
developing countries, where credit markets are underdeveloped. We find patterns
previously unnoticed in the literature. Within-cohort inequality in consumption often
decreases with age, and the divergence of the pattern from those observed in developed
countries is larger among uneducated and rural households. We provide an interpretation
that the decreasing age effect in consumption inequality within cohort, found widely
in low-income regions and classes in Asia, is consistent with partial insurance models,
either with within-cohort inequality in income decreasing with age, or with insurance
efficiency increasing with age

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