Krislert Samphantharak's Research Referenced in MIT News
Tracing families' escape from poverty
01/10/2011
Peter Dizikes,
MIT News Office
For all the detailed tools developed to study finance in past decades, relatively few scholars have brought those methods to bear on a pressing social question: How do poor people manage their finances?
Now, a long-term study of the poor in small villages in Thailand is shedding light on the issue. Having a sound financial strategy, including a commitment to saving money has a large impact on lifting families out of poverty, the research reveals. Moreover, advances in wealth are linked to highest level of education obtained by a household member, as well as a willingness to try new ventures.
The study, based on a unique set of data collected under the direction of MIT economist Robert M. Townsend, shows that among rural households, 43 percent realized significant and lasting gains in net worth over a seven-year period, and that 81 percent of that wealth accumulation was due to savings of income, as opposed to gifts or remittances, that is, contributions the family did not earn.
“There is not a poverty trap in these Thai villages,” says Townsend, the Elizabeth and James Killian Professor of Economics at MIT. “There are strategies people can pursue to increase their relative wealth.”
The findings are summarized in a new working paper, “Wealth Accumulation and Factors Accounting for Success,” written by Townsend and Anan Pawasutipaisit of Thammasat University in Thailand, and slated to be published in the Journal of Econometrics. The conclusions are based on a pioneering survey of household finances in 16 Thai villages that Townsend initiated in 1997. This paper takes monthly data from 1999 through 2006, for 531 households, and represents a unique view into the month-by-month financial lives of rural villagers in a country that has demonstrated substantial economic growth in recent years, yet still has substantial pockets of poverty.
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Professor Krislert Samphantharak's research applies frameworks and theories in corporate finance and asset pricing to study household finance in developing economies. His current research on village economies in Thailand looks at household's occupation diversification, volatility and smoothing of household income and consumption, and risks and returns on household assets.
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