How Important Is Precautionary Saving?

Christopher Carroll and Andrew Samwick

The Review of Economics and Statistics, 1998, vol. 80, issue 3, 410-419

Abstract: We estimate how much of the wealth of a sample of respondents to the Panel Study of Income Dynamics is held because some households face more income uncertainty than others. We begin by solving a theoretical model of saving, which we use to develop appropriate measures of uncertainty. We then regress households' wealth on our measures of uncertainty, and find substantial evidence that households engage in precautionary saving. Finally, we simulate the wealth distribution that our empirical results imply would prevail if all households had the same uncertainty as the lowest uncertainty group. We find that between 32 and 50% of wealth in our sample is attributable to the extra uncertainty that some consumers face compared to the lowest uncertainty group. © 1998 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (298)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/003465398557645 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: How Important is Precautionary Saving? (1995)
Working Paper: How important is precautionary saving? (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:80:y:1998:i:3:p:410-419

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().