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Saving Behavior under the Influence of Income Risk: An Experimental Study

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  • Tomoki Kitamura

    ()
    (NLI-Research Institute and Graduate School of International Management, Aoyama Gakuin University)

  • Yasuhiro Yonezawa

    ()
    (Graduate School of Finance, Accounting and Law, Waseda University)

  • Munenori Nakasato

    ()
    (Graduate School of International Management, Aoyama Gakuin University)

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    Abstract

    Individual subjects are experimentally tested for precautionary saving. We use a simplified experimental framework and decision supporting tool to show that subject's consumption is consistent with precautionary saving. We find that subjects overact in changing current income. However, those over-reactions cancel each other, and subject's consumption behavior is close to the optimal solutions on average.

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P90.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 30 (2010)
    Issue (Month): 2 ()
    Pages: 967-974

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    Handle: RePEc:ebl:ecbull:eb-10-00153

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    Related research

    Keywords: Precautionary Saving; Experiment;

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    1. T. Parker Ballinger & Michael G. Palumbo & Nathaniel T. Wilcox, 2003. "Precautionary saving and social learning across generations: an experiment," Economic Journal, Royal Economic Society, vol. 113(490), pages 920-947, October.
    2. Enrica Carbone & John D. Hey, 2004. "The effect of unemployment on consumption: an experimental analysis," Economic Journal, Royal Economic Society, vol. 114(497), pages 660-683, 07.
    3. Lusardi, Annamaria, 1998. "On the Importance of the Precautionary Saving Motive," American Economic Review, American Economic Association, vol. 88(2), pages 449-53, May.
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