Saving and Income Smoothing in Côte d'Ivoire1

Abstract

This paper is concerned with the extent to which farmers and other households in Cote d'lvoire save and dis-save in order to make their consumption smoother than their incomes. I attempt to test a strict form of inter-temporal smoothing, that consumption follows the permanent income hypothesis, by which consumption is equal to the annuity value of the sum of assets and the present discounted value of current and expected future labour income. The extent to which households in LDCs can and do smooth their incomes is still a matter of debate. Especially in rural areas, formal credit markets are imperfect or absent, and it has sometimes been argued that poor and ill-educated people find it inherently difficult to make good inter-temporal choices. Yet many important policy issues hang on the issue.