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Income Risk, Saving and Taxation:Will Precautionary Saving Survive?

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  • Stefan Arent
  • Alexander Eck

    ()

  • Michael Kloss
  • Oskar Krohmer

Abstract

Former theoretical and empirical studies find that precautionary savings are reduced inthe presence of social security systems. The saving motive, however, does not change:individuals respond to increasing income risk by increasing their savings. Although thisstill holds for common tax and transfer systems, we show that this is not a feature of alltax and transfers systems. In contrast to former studies, we focus on the impact of thevariability of future income (higher degree risk).

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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 125.

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Date of creation: 2012
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Handle: RePEc:ces:ifowps:_125

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Related research

Keywords: Income risk; saving behavior; social security; unemployment benefit; taxation;

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References

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  1. Jan Kluge & Robert Lehmann, 2012. "Marshall or Jacobs? Answers to an unsuitable question from an interaction model," Ifo Working Paper Series ifo Working Paper No. 124, Ifo Institute for Economic Research at the University of Munich.
  2. Louis Eeckhoudt & Harris Schlesinger, 2008. "Changes in Risk and the Demand for Saving," CESifo Working Paper Series 2388, CESifo Group Munich.
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Cited by:
  1. Christian Seiler, 2012. "On the Robustness of the Balance Statistics with respect to Nonresponse," Ifo Working Paper Series Ifo Working Paper No. 126, Ifo Institute for Economic Research at the University of Munich.
  2. Stefan Arent, 2012. "Expectations and Saving Behavior: An Empirical Analysis," Ifo Working Paper Series Ifo Working Paper No. 128, Ifo Institute for Economic Research at the University of Munich.
  3. Stefan Arent, 2012. "Erwartungen und Sparen: wie wirken Arbeitslosigkeits- und Gesundheitserwartungen auf die Sparentscheidung von Haushalten?," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, vol. 19(02), pages 13-18, 04.

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