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Precautionary and Entrepreneurial Saving: New Evidence from German Households

Frank Fossen and Davud Rostam-Afschar

No 920, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: The well-documented positive correlation between income risk and wealth was interpreted as evidence for high amounts of precautionary wealth in various studies. However, the large estimates emerged from pooling non-entrepreneurs and entrepreneurs without controlling for heterogeneity. This paper provides evidence for Germany based on representative panel data including private wealth balance sheets. Entrepreneurs, who face high income risk, hold more wealth than employees, but it is shown that this is not due to precautionary motives. Entrepreneurs may rather save for old age, as they are usually not covered by statutory pension insurance. The analysis accounts for endogeneity of entrepreneurial choice.

Keywords: precautionary saving; precautionary wealth; entrepreneurship (search for similar items in EconPapers)
JEL-codes: D91 D12 E21 (search for similar items in EconPapers)
Pages: 31 p.
Date: 2009
New Economics Papers: this item is included in nep-age, nep-eec and nep-ent
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http://www.diw.de/documents/publikationen/73/diw_01.c.334109.de/dp920.pdf (application/pdf)

Related works:
Journal Article: Precautionary and Entrepreneurial Savings: New Evidence from German Households (2013) Downloads
Working Paper: Precautionary and Entrepreneurial Saving: New Evidence from German Households (2009) Downloads
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