Use of gold as alternative savings means in Indian households. / Dimopoulou, Angeliki.

2019.

Research output: Working paper

In preparation

Abstract

Using data from the Indian Household Consumer Expenditure survey, I show that vulnerable Indian households do not treat gold jewellery as a luxury good, but as a substitute to for savings. Households in rural locations, with irregular income, with illiterate heads and with casual or agricultural labour as the main source of income have higher expenditures on gold. This can be explained by the Permanent Income Hypothesis. Households mitigate future uncertainty by accumulating gold to smooth out future income shocks.
I test two alternative hypotheses for high levels of spending on gold in India. I find limited support for an alternative hypothesis that high levels of gold expenditure simply reflect expenditures on dowries, a form of cultural preferences stemming from religion. I find no evidence of a second alternative hypothesis, namely that intra-household bargaining power, measured by the by wife’s relative education level, influences gold purchases.
Finally, using Engel curves, I examine whether these results are due to anomalies in the Indian data by examining expenditures on food, a normal good.
Original languageEnglish
Publication statusIn preparation - 2019

ID: 35150686