Three Essays on Consumption Smoothing

Macroeconomic theory has established that consumption smoothing leads to higher standards of living. A stable consumption path can lead to more stability and less uncertainty between periods of high and low income. However, there is a wide body of literature that shows people do not consistently smooth their consumption when exposed to adverse income shocks. This dissertation uses experimental and empirical methods to better understand the obstacles people face when trying to smooth their consumption over time. It looks to understand the differences in pairs and individuals’ ability to smooth consumption. It also explores how the household’s level of income affects the level of consumption smoothing in response to an income shock and what constraints households face when trying to access the different insurance mechanisms