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Income Risk, Saving and Taxation:Will Precautionary Saving Survive?

Stefan Arent (), Alexander Eck, Michael Kloß and Oskar Krohmer
Authors registered in the RePEc Author Service: Michael Weber

No 125, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: Former theoretical and empirical studies find that precautionary savings are reduced in the presence of social security systems. The saving motive, however, does not change: individuals respond to increasing income risk by increasing their savings. Although this still holds for common tax and transfer systems, we show that this is not a feature of all tax and transfers systems. In contrast to former studies, we focus on the impact of the variability of future income (higher degree risk).

Keywords: Income risk; saving behavior; social security; unemployment benefit; taxation (search for similar items in EconPapers)
JEL-codes: D11 D31 D91 H24 H31 (search for similar items in EconPapers)
Date: 2012
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