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The Relevance of Precautionary Saving

Author

Listed:
  • Ventura Luigi

    (University of Rome ‘La Sapienza’,Rome, Italy)

  • Eisenhauer Joseph G.

    (Canisius College, Buffalo,New York, United States of America)

Abstract

This paper develops a model of personal saving that includes, unlike previous models appearing in the literature, an explicit role for the Leland-Kimball measure of prudence. Estimation of the model using Bank of Italy survey data suggests that about 20 per cent of total saving is driven by precautionary reasons.

Suggested Citation

  • Ventura Luigi & Eisenhauer Joseph G., 2005. "The Relevance of Precautionary Saving," German Economic Review, De Gruyter, vol. 6(1), pages 23-35, February.
    • Handle: RePEc:bpj:germec:v:6:y:2005:i:1:p:23-35
    DOI: 10.1111/j.1465-6485.2005.00120.x
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    References listed on IDEAS

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    1. Kuehlwein, Michael, 1991. "A test for the presence of precautionary saving," Economics Letters, Elsevier, vol. 37(4), pages 471-475, December.
    2. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November.
    3. Starr-McCluer, Martha, 1996. "Health Insurance and Precautionary Savings," American Economic Review, American Economic Association, vol. 86(1), pages 285-295, March.
    4. Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(3), pages 465-473.
    5. Mark Kazarosian, 1997. "Precautionary Savings-A Panel Study," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 241-247, May.
    6. Adam J. Grossberg, 1991. "Personal Saving under Income Uncertainty: A Test of the Intertemporal Substitution Hypothesis," Eastern Economic Journal, Eastern Economic Association, vol. 17(2), pages 203-210, Apr-Jun.
    7. Carroll Christopher Dixon, 2001. "Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-38, April.
    8. Luigi Guiso & Monica Paiella, 2008. "Risk Aversion, Wealth, and Background Risk," Journal of the European Economic Association, MIT Press, vol. 6(6), pages 1109-1150, December.
    9. Miles S. Kimball, 1990. "Precautionary Saving and the Marginal Propensity to Consume," NBER Working Papers 3403, National Bureau of Economic Research, Inc.
    10. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
    11. Christopher D. Carroll & Andrew A. Samwick, 1998. "How Important Is Precautionary Saving?," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 410-419, August.
    12. Jonathan A. Parker, 1999. "The Reaction of Household Consumption to Predictable Changes in Social Security Taxes," American Economic Review, American Economic Association, vol. 89(4), pages 959-973, September.
    13. Irvine, Ian & Wang, Susheng, 2001. "Saving behavior and wealth accumulation in a pure lifecycle model with income uncertainty," European Economic Review, Elsevier, vol. 45(2), pages 233-258, February.
    14. Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
    15. Luigi Ventura & Joseph Eisenhauer, 2006. "Prudence and precautionary saving," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 30(2), pages 155-168, June.
    16. Joseph Eisenhauer & Luigi Ventura, 2003. "Survey measures of risk aversion and prudence," Applied Economics, Taylor & Francis Journals, vol. 35(13), pages 1477-1484.
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    Cited by:

    1. Lars Fredrik Andersson & Liselotte Eriksson, 2013. "Compulsory public pension and the demand for life insurance: the case of Sweden," Working Papers 13030, Economic History Society.
    2. Barasinska, Nataliya & Schäfer, Dorothea & Stephan, Andreas, 2012. "Individual Risk Attitudes and the Composition of Financial Portfolios: Evidence from German Household Portfolios," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 52(1), pages 1-14.
    3. Marcus Klemm, 2012. "Job Security Perceptions and the Saving Behavior of German Households," Ruhr Economic Papers 0380, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. Filippo Pericoli & Luigi Ventura, 2012. "Family dissolution and precautionary savings: an empirical analysis," Review of Economics of the Household, Springer, vol. 10(4), pages 573-595, December.
    5. repec:zbw:rwirep:0380 is not listed on IDEAS
    6. Lars-Fredrik Andersson & Liselotte Eriksson, 2015. "The compulsory public pension and the demand for life insurance: the case of Sweden, 1884–1914," Economic History Review, Economic History Society, vol. 68(1), pages 244-263, February.
    7. Luc Arrondel & Hector Calvo Pardo, 2008. "Les Français sont-ils prudents ? Patrimoine et risque sur les revenus des ménages," PSE Working Papers halshs-00585994, HAL.
    8. Klemm, Marcus, 2012. "Job Security Perceptions and the Saving Behavior of German Households," Ruhr Economic Papers 380, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Bando, Rosangela & Uribe, Claudia, 2016. "Experimental Evidence on Credit Constraints," IDB Publications (Working Papers) 7491, Inter-American Development Bank.
    10. repec:ebl:ecbull:v:4:y:2007:i:23:p:1-11 is not listed on IDEAS

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