Dynastic Precautionary Savings

Deconstructing Life Cycle Expenditure

Corina Boar

The Review of Economic Studies, 2021, vol. 88, issue 6, 2735-2765

Abstract: This article documents that parents accumulate savings to insure their children against income risk. I refer to this behaviour as dynastic precautionary saving. Using a sample of matched parent–child pairs from the Panel Study of Income Dynamics, I test for dynastic precautionary savings by examining the response of parental consumption to the child’s permanent income uncertainty. I exploit variation in permanent income risk across age and industry–occupation groups to confirm that, all else equal, higher uncertainty in the child’s permanent income depresses parental consumption, indicating a precautionary saving motive across generations.

Keywords: Consumption; Income Risk; Precautionary Saving; Altruism; D15; D64; E21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:88:y:2021:i:6:p:2735-2765.

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