Consumption over the life cycle in Poland

The article attempts to verify the existence and strength of the buffer stock and precautionary savings’ behaviours of households in Poland, with the use of the dynamic stochastic model of permanent income with life cycle hypothesis (PILCH). The theoretical part of the model relies heavily on Gourinchas & Parker [14], while numerical solutions are based on Carroll [3]. The model includes partial insurance of households against idiosyncratic risk. The data relies on two household surveys: on budgets (HBS) and wealth (HWS), with parametrisation based on the 1% sample from the social insurance administrative data. The results generally seem to confirm the initial presumption on doubtful reflection of the dynamic economic reality of the fast converging market economy in the applied version of the model. The reason may stem from the lack of sufficiently stable economic environment through at least one full working career path of the household generation. Polish households, in general, are not (yet) patient enough to create buffer stock behaviour based on financial means, so precautionary behaviour prevails. The detailed results for decomposed types of households show proof for buffer stock behaviour for high school graduates from richer regions, and specific professions.