The Importance of Precautionary Motives in Explaining Individual and Aggregate Saving

R. Glenn Hubbard, Jonathan Skinner and Stephen Zeldes

No 4516, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines predictions of a life-cycle simulation model -- in which individuals face uncertainty regarding their length of life, earnings, and out-of-pocket medical expenditures, and imperfect insurance and lending markets -- for individual and aggregate wealth accumulation. Relative to life-cycle or buffer-stock alternatives, our augmented life-cycle model better matches a variety of features of U.S. data, including: (1) aggregate wealth, (2) cross-sectional differences in wealth-age and consumption-age profiles by education group, and (3) short-run time-series co-movements of consumption and income.

JEL-codes: E21 H31 (search for similar items in EconPapers)
Date: 1993-11
Note: AG PE EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (133)

Published as Carnegie-Rochester Conference Series on Public Policy, 40 (June 1994)pp. 59-126

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Journal Article: The importance of precautionary motives in explaining individual and aggregate saving (1994)
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