The Importance of Business Owners in Assessing the Size of Precautionary Savings
Erik Hurst (),
Annamaria Lusardi (),
Arthur Kennickell and
Additional contact information
Arthur Kennickell: Board of Governors of the Federal Reserve System
Francisco Torralba: University of Chicago
The Review of Economics and Statistics, 2010, vol. 92, issue 1, 61-69
Not properly accounting for differences between business owners and nonbusiness owners in studies of household wealth can lead to erroneous conclusions about the significance of different saving motives. Using data from the Panel Study of Income Dynamics from the 1980s and 1990s, we show that within samples of both business owners and non-business owners, the amount of precautionary savings with respect to labor income risk is modest and accounts for less than 10% of total household wealth. Previous large estimates of the size of precautionary balances resulted from pooling these two groups together. Such pooling is inappropriate given that business owners face higher labor risk and accumulate more wealth than non-business owners for reasons unrelated to precautionary motives. © 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
References: Add references at CitEc
Citations View citations in EconPapers (12) Track citations by RSS feed
Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/rest.2009.11500 link to full text (application/pdf)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:92:y:2010:i:1:p:61-69
Ordering information: This journal article can be ordered from
http://mitpress.mit. ... me.tcl?issn=00346535
Access Statistics for this article
The Review of Economics and Statistics is currently edited by Daron Acemoglu, George J. Borjas, Dani Rodrik and Julio J. Rotemberg
More articles in The Review of Economics and Statistics from MIT Press
Series data maintained by Kristin Waites ().