This monograph emerged from our efforts to study the behavior of the households from the Townsend Thai Monthly Survey. This experience convinced us that imposing an accounting framework and creating financial statements would be a useful, indeed a necessary, first step for the analysis of household finance, especially from high-frequency, monthly data. We believe that this accounting framework will help researchers better define and more accurately measure household income, consumption, saving, and other financial variables, and in the end enhance our understanding of the behavior of the households in developing countries. As we illustrate in this monograph, the corporate accounting framework also allows us to apply the concepts of corporate financial analysis and theories in corporate finance to the study of household behavior. It is important to emphasize that although some specific, arbitrary decisions have to be made when we work with survey data such as those from the Townsend Thai Monthly Survey in this monograph, the accounting framework in general is not specific to any survey. The accounting framework could be largely applied to other household surveys in developing countries.

The work on this monograph began when both of us were at the University of Chicago. The early idea benefited from our conversation with former students in the Townsend research group, especially Masayuki Tachiiri. Subsequently, Nick Bloom, Angus Deaton, Takeo Hoshi, Costas Meghir, Jonathan Morduch, Chris Woodruff, the editor (Andrew Chesher), and three anonymous referees have provided detailed comments and suggestions, at various stages of the project.