Precautionary wealth and income uncertainty: a household-level analysis

Ashok Mishra (), Hiroki Uematsu and Rebekah R. Powell
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Hiroki Uematsu: Louisiana State University AgCenter and Louisiana State University, http://www.agecon.lsu.edu/
Rebekah R. Powell: Louisiana State University AgCenter and Louisiana State University, http://www.agecon.lsu.edu/

Journal of Applied Economics, 2012, vol. 15, 353-369

Abstract: This study investigates the presence of precautionary savings among self-employed farm households using an instrumental variable approach on farm-level data. Results indicate that precautionary saving is a powerful determinant of wealth accumulation among U.S. farm households. Precautionary savings account for 53% of total wealth accumulation in general. Our results indicate an age-wealth profile that is consistent with the life-cycle hypothesis. The share of precautionary saving in total wealth accumulation differs across farm households. Results show that for farm households receiving government payments (designed to benefit farmers by reducing income variability), precautionary saving account for a large share (51%) of wealth accumulation, compared to 41% for households that do not receive any government payments.

Keywords: Income uncertainty; permanent income; precautionary savings; life-cycle; and instrumental variables; government program. (search for similar items in EconPapers)
JEL-codes: D91 G18 J24 Q12 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:cem:jaecon:v:15:y:2012:n:2:p:353-369

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