Policy Uncertainty and Household Savings
AbstractUsing German microdata and a quasi-natural experiment, we provide evidence on how households respond to an increase in uncertainty. We find that household saving increases significantly following the increase in political uncertainty observed in the run-up to the 1998 German general election. We also find evidence of a labor supply response by workers who can use the margin offered by part-time employment. Our results are suggestive of the economic effects of “wars of attrition”: when political disagreement leads to delays in adopting a reform or the possibility that earlier reforms may be revoked, the increased uncertainty could slow the economy. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics and Statistics.
Volume (Year): 94 (2012)
Issue (Month): 2 (May)
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Web page: http://mitpress.mit.edu/journals/
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
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- 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.
- Ashoka Mody & Franziska Ohnsorge & Damiano Sandri, 2012.
"Precautionary Savings in the Great Recession,"
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- 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.
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