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Family dissolution and precautionary savings: an empirical analysis

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  • Filippo Pericoli
  • Luigi Ventura

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Abstract

The main research question of this paper is whether or not the risk of family disruption has an impact on the consumption/saving decisions of households. Although little empirical work exists in this area, often presenting indirect evidence, the theory is divided over the effect of family risk over saving and wealth accumulation. By using data from the Italian Survey on Households Income and Wealth, we build a probabilistic model to assess the probability of marital splitting, and then we insert this probability as a distinct or interacted regressor, in a statistically consistent way, into a linear model of consumption. Furthermore, we study the differential behaviour, in terms of consumption/saving choices, of couples experiencing marital splitting over the subsequent 2 years. The main result of our analysis is that family disruption risk generates precautionary savings, reducing current consumption. In fact, according to our estimates, on average, the risk of divorce generates an amount of additional yearly precautionary savings of around 800 euros at constant prices of the year 2000, which represents 11% of overall household savings. Copyright Springer Science+Business Media, LLC 2012

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Bibliographic Info

Article provided by Springer in its journal Review of Economics of the Household.

Volume (Year): 10 (2012)
Issue (Month): 4 (December)
Pages: 573-595

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Handle: RePEc:kap:reveho:v:10:y:2012:i:4:p:573-595

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Web page: http://www.springerlink.com/link.asp?id=109451

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Keywords: Family disruption risk; Precautionary savings; Risk sharing;

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References

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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Divorce risk is good for the savings rate
    by Economic Logician in Economic Logic on 2012-02-23 15:53:00
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Cited by:
  1. Thomas Gries & Ha van Dung, 2014. "Household Savings and Productive Capital Formation in Rural Vietnam: Insurance vs. Social Network," Working Papers CIE 81, University of Paderborn, CIE Center for International Economics.
  2. Wataru Kureishi & Midori Wakabayashi, 2013. "What motivates single women to save? the case of Japan," Review of Economics of the Household, Springer, vol. 11(4), pages 681-704, December.

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