Cross-sectional analyses of precautionary motive have employed the occupational information to measure income uncertainty (Skinner (1988), Dardanoni (1991) etc.). We follow this literature and posit that different occupations are associated with different levels of income uncertainty. To this end, we classify households into different occupational groups. Following, we measure the variance in the residual of household income within each group after the effects of human capital variables and a host of fixed factors have been accounted for. This variance of the residual becomes our measure of income uncertainty which we use to analyze precautionary wealth accumulation in the country. Using two measures of wealth – one narrow and the other broad, we find a strong and highly significant positive relationship between income uncertainty and household wealth. The coefficients estimated using the narrower definition are five to six times as large as for the broader measure. On the other hand, the estimated coefficients for the broader wealth measure are similar in magnitude to what is obtained in some developed countries.5 A challenge associated with any wealth measure is that it might fail to account for some sources of wealth that are held for precautionary needs. This omission can occur due to gaps in data or due to the definition of wealth used. We address this concern by looking at annual household expenditures on non-durables. We find that households facing higher income uncertainty not only hold higher stock of wealth but also spend less compared to households with lower variance at similar levels of income. However, period adjustment in aggregate wealth via changes in expenditures is not a necessary condition for the existence of the precautionary motive under the buffer-stock model. In this light, we recognize this relationship as a secondary test of the precautionary channel. We also consider how the precautionary wealth accumulation varies across the income distribution. Poor households typically have lower access to formal and informal borrowing channels which will make the precautionary channel stronger. We compare wealth accumulation across income quantiles and find that the strength of the precautionary motive decreases systematically with rising income. The precautionary response is specifically higher for the households in the bottom 40 percent of the income distribution compared to the relatively richer households.

Having found a systematic association between income uncertainty and wealth accumulation, we next investigate how conflict interacts with the precautionary behavior of the households. What motivates this line of inquiry is the possibility that some instruments of wealth accumulation that are available in the relatively low-conflict regions may not be available in the high-conflict regions. If the sale of certain assets occurs at centralized markets, then it is a dangerous undertaking to sell them in a high-conflict region. Additionally, it is possible that certain assets like livestock are

> 5For example, Carroll & Samwick (1998) estimate these coefficients using US data and Fuchs-Schündeln & Schündeln (2005) study precautionary wealth accumulation in Germany. However, we note that both differences in data and definitions do not allow for a direct comparison of these coefficients across countries.

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