Buffer-Stock Saving and Households' Response to Income Shocks

Giulio Fella, Serafin Frache and Winfried Koeniger

No 10311, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We use the Italian Survey of Household Income and Wealth, a rather unique dataset with a long time dimension of panel information on consumption, income and wealth, to structurally estimate a buffer-stock saving model. We exploit the information contained in the joint dynamics of income, consumption and wealth to quantify the degree of insurance against income risk. The estimated model implies that Italian households can insure between 89 and 95 percent of a transitory and between 7 and 9 percent of a permanent income shock. Compared to existing empirical estimates for the same dataset, our findings suggest that Italian households do not have access to significant insurance beyond self-insurance.

Keywords: consumption; wealth; income shocks; incomplete markets; insurance (search for similar items in EconPapers)
JEL-codes: D91 E21 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2016-10
New Economics Papers: this item is included in nep-ias and nep-mac
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Published - revised version published in: International Economic Review, 2020, 61, 1359-1382.

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https://docs.iza.org/dp10311.pdf (application/pdf)

Related works:
Journal Article: BUFFER‐STOCK SAVING AND HOUSEHOLDS' RESPONSE TO INCOME SHOCKS (2020)
Working Paper: Buffer-stock saving and households' response to income shocks (2017)
Working Paper: Buffer-stock saving and households' response to income shocks (2017)
Working Paper: Buffer-stock saving and households' response to income shocks (2016)
Working Paper: Buffer-Stock Saving and Households' Response to Income Shocks (2016)
Working Paper: Buffer-Stock Saving and Households' Response to Income Shocks (2016)
Working Paper: Buffer-stock savings and households' wealth response to income shocks (2016)
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