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Precautionary wealth accumulation: evidence from Canadian microdata

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  • Sule Alan

Abstract

This paper estimates the effect of labour income uncertainty on wealth accumulation using two data sources. Wealth information is obtained from the master files of the new Canadian Survey of Financial Security 1999 (SFS). Labour income risk proxies are constucted by industry using the Canadian Survey of Labour and Income Dynamics (SLID) between 1996 and 2001. The empirical results suggest the presence of a strong precautionary saving motive among Canadian households for broad definitions of wealth. Furthermore, consistent with the buffer‐stock‐saving model, the level of precautionary funds significantly increases when households face liquidity constraints. Ce texte calcule l'effet de l'incertitude du revenu de travail sur l'accumulation de la richesse à l'aide de deux sources de données. Les données sur la richesse sont tirées des résultats de l'Enquête sur la sécurité financière (ESF) de 1999. Les coefficients de risque attachés aux diverses industries sont développés à partir des résultats de l'Enquête sur la dynamique du travail et du revenu (EDTR) entre 1996 et 2001. Les résultats empiriques suggèrent la présence d'une forte motivation des ménages canadiens àépargner aux fins de précaution, si l'on accepte des définitions assez compréhensives de la richesse. De plus, d'une manière qui correspond au modèle d'épargne pour stockage tampon, le niveau des fonds aux fins de précaution s'accroît de manière significative à proportion que les ménages font face à des contraintes de liquidité.

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  • Sule Alan, 2006. "Precautionary wealth accumulation: evidence from Canadian microdata," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(4), pages 1105-1124, November.
    • Handle: RePEc:wly:canjec:v:39:y:2006:i:4:p:1105-1124
    DOI: 10.1111/j.1540-5982.2006.00383.x
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    Cited by:

    1. Buly A. Cardak & Roger Wilkins, 2008. "The Determinants of Household Risky Asset Holdings: Background Risk and Other Factors," Melbourne Institute Working Paper Series wp2008n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    2. Bande, Roberto & Riveiro, Dolores & Ruiz, Freddy, 2021. "Does Uncertainty Affect Saving Decisions of Colombian Households? Evidence on Precautionary Saving," MPRA Paper 106771, University Library of Munich, Germany.
    3. 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.
    4. Davies, James B. & Yu, Xiaoyu, 2013. "Impacts of Cyclical Downturns on the Third Pillar of the RIS and Policy Responses," CLSSRN working papers clsrn_admin-2013-20, Vancouver School of Economics, revised 29 Apr 2013.

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