Author: Maria Christina Rossi
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
Precautionary savings have often been analyzed with regard to its impact on current savings. This work focuses instead on the impact of uncertainty on savings under bequest form. We thus turn the focus on estimating whether and to what extent income variability does have an effect on post-mortem savings. We approximate the post-mortem savings with the closest dedicated savings, which is savings in term insurance, a lump sum inherited at the death of the subscriber. Furthermore, we test whether the intensity of the income variance or the riskiness of the job type - such as self-employment - matters more in the choice. Our results show that, even after controlling for income uncertainty, self-employment status is one of the most relevant variables affecting term insurance ownership.
Author: Erik Hurst
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 74
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Book Description
In this paper, we show the pivotal role business owners play in estimating the importance of the precautionary saving motive. Since business owners hold larger amounts of wealth than other households for non-precautionary reasons and also face highly volatile income, they induce a correlation between wealth and income risk regardless of whether or not a precautionary saving motive exists. Using data from the Panel Study of Income Dynamics in the 1980s and the 1990s, we show that among both business owners and non-business owners, the size of precautionary savings with respect to labor income risk is modest and accounts for less than ten percent of total household wealth. However, pooling together the two groups leads to an artificially high estimate of the importance of precautionary savings. New data from the Survey of Consumer Finances further confirms that precautionary savings account for less than ten percent of total wealth for both business owners and non-business owners. Thus, while a precautionary saving motive exists and affects all households, it does not give rise to high amounts of wealth in the economy, particularly among those households who face the most volatile stream of income.
Author: Jonathan Skinner
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 25
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Book Description
This paper argues that precautionary savings against uncertain income comprise a large fraction of aggregate savings. A closed-form approximation for life cycle consumption subject to uncertain interest rates and earnings is derived by taking a second-order Taylor-Series approximation of the Euler equations. Using empirical measures of income uncertainty, I find that precautionary savings comprises up to 56 percent of aggregate life cycle savings. The derived expression for n-period optimal consumption is easily implemented for econometric estimation, and accords well with the exact numerical solution. Empirical comparisons of savings patterns among occupational groups using the Consumer Expenditure Survey contradict the predictions of the life cycle model. Riskier occupations, such as the self-employed and salespersons, save less than other occupations, although this finding may in part reflect unobservable differences in risk aversion among occupations
Author: Kristel D. Buysse
Publisher:
ISBN:
Category :
Languages : en
Pages : 248
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Book Description
Author: Chris Carroll
Publisher:
ISBN:
Category : Consumer behavior
Languages : en
Pages : 68
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Book Description
Author: Wendy E. Dunn
Publisher:
ISBN:
Category : Consumer behavior
Languages : en
Pages : 46
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Book Description
Author: Martha A. Starr
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 56
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Book Description
Author: Luigi Guiso
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 56
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Book Description
Author: Luigi Guiso
Publisher:
ISBN:
Category : Econometrics
Languages : en
Pages : 58
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Book Description
Author: Erik Hurst
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 54
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Book Description
"In this paper, we show the pivotal role business owners play in estimating the importance of the precautionary saving motive. Since business owners hold larger amounts of wealth than other households for non-precautionary reasons and also face highly volatile income, they induce a correlation between wealth and income risk regardless of whether or not a precautionary saving motive exists. Using data from the Panel Study of Income Dynamics in the 1980s and the 1990s, we show that among both business owners and non-business owners, the size of precautionary savings with respect to labor income risk is modest and accounts for less than ten percent of total household wealth. However, pooling together the two groups leads to an artificially high estimate of the importance of precautionary savings. New data from the Survey of Consumer Finances further confirms that precautionary savings account for less than ten percent of total wealth for both business owners and non-business owners. Thus, while a precautionary saving motive exists and affects all households, it does not give rise to high amounts of wealth in the economy, particularly among those households who face the most volatile stream of income"--National Bureau of Economic Research web site.
