Saving from Permanent and Transitory Income. The Case of Polish Households

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Saving from Permanent and Transitory Income. The Case of Polish Households

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Zofia Liberda
Brunon Górecki
Marek Pêczkowski

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Barbara Liberda

Abstract

The paper analyses the impact of income uncertainty on household saving. Using a panel of Polish households for 1997-2000 we decompose uncertainty of household income into a variance of shocks to permanent income and a variance of shocks to transitory income. Then we regress households' savings onthe estimated measures of income uncertainty controlling for demographicand social variables. Our empirical results indicate that the average variances of permanent and transitory income of Polish households do not differ much. Both measures of income uncertainty are statistically significant in predicting saving. The permanent income uncertainty affects savings more than the uncertainty of transitory income. A significant part of households' saving in Poland may be of precautionary, buffer-stock character.

This paper is the CHER (Consortium of the Household Panels for European Socio-economic Research) Working Paper, 2003, No. 15, presented at the 28th General Conference of the International Association for Research in Incomeand Wealth in Cork, Ireland in 2004 and at the CHER workshop in Spain, 2002. It is a companion paper to: Uncertainty of Households' Income in the European Union Countries and Poland., co-authored by B. Liberda, B. GÃƒÂ³recki andM. PÃ„Â™czkowski, that was published in EMERGO, 4(38)/2003 and appeared also as CHER Working Paper, 2003, No. 13, within the program Improving the Human Research Potential and the Socio-Economic Knowledge Base, supportedby the European Commission.

In preparing both papers we benefited from the grant by the Polish NationalCommittee for Scientific Research (KBN) for years 2001.2003, No. 5.1.102C 051

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Article provided by Faculty of Economic Sciences, University of Warsaw in its journal Ekonomia journal.

Volume (Year): 14 (2006)
Issue (Month): ()
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Handle: RePEc:eko:ekoeko:14_7

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