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Precautionary Saving and Income Uncertainty in Germany – New Evidence from Microdata

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  • Nikolaus Bartzsch

    ()
    (Deutsche Bundesbank, Zentralbereich Volkswirtschaft)

Abstract

This paper uses microdata from the German Socio-Economic Panel Study (GSOEP) to analyse the importance of precautionary saving under income uncertainty. In a cross-section of households, wealth in 2002 is regressed on alternative measures of income uncertainty. In addition to the usual controls, risk aversion is also taken into account. When using net financial wealth, precautionary saving is statistically significant and economically quite important. Precautionary net financial wealth is estimated to make up, on average, around 20% of total aggregate net financial wealth. Unlike net financial wealth, housing wealth is not used as a buffer stock against income uncertainty, the most likely reason being its illiquidity in Germany. Not controlling for risk aversion leads to an overestimation of precautionary wealth. This result contradicts the findings of Fuchs-Schündeln and Schündeln (2005) who suggest that, owing to self-selection, not controlling for risk aversion results in a significant reduction in aggregate precautionary wealth holdings.

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Bibliographic Info

Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 228 (2008)
Issue (Month): 1 (February)
Pages: 5-24

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Handle: RePEc:jns:jbstat:v:228:y:2008:i:1:p:5-24

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Keywords: Precautionary saving; precautionary wealth; buffer-stock model; self-selection;

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References

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Citations

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Cited by:
  1. Nikolaus Bartzsch, 2006. "Vorsichtssparen und Einkommensunsicherheit privater Haushalte in Deutschland: eine ökonometrische Untersuchung auf Basis von SOEP-Daten," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 75(4), pages 109-120.
  2. 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.
  3. Clovis Kerdrain & Isabell Koske & Isabelle Wanner, 2011. "Current Account Imbalances: can Structural Reforms Help to Reduce Them?," OECD Journal: Economic Studies, OECD Publishing, vol. 2011(1), pages 1-44.
  4. Marcus Klemm, 2012. "Job Security and Fertility: Evidence from German Reunification," Ruhr Economic Papers 0379, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  5. Clovis Kerdrain & Isabell Koske & Isabelle Wanner, 2010. "The Impact of Structural Policies on Saving, Investment and Current Accounts," OECD Economics Department Working Papers 815, OECD Publishing.

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