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Risk Management and Wealth Accumulation Behavior in France

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  • Arrondel, L.

Abstract

In a prevailing climate of increasing uncertainty (rising risk of unemployment, pension funding problems and unstable family structures), French households have adopted new saving behavior reflected during the nineties, primarily by considerable investment in life insurance products (representing more than 50 percent of financial saving). Recent theoretical saving models have placed greater emphasis on studying prudent behavior in the face of an uncertain future and have shown the influences of multiple risks and borrowing constraints on precautionary savings and portfolio choices. In this vein, a household exposed to a high future income risk or strong liquidity constraints may increase its savings, reduce its investments in risky assets and increase its share of liquid investments. In this paper, wealth accumulation and their relation to these new factors will be specifically studied. Empirical tests on recent French data ("Patrimoine 97") show the relevance of subjective earnings variance to explain wealth accumulation but its contribution is not very large.

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Bibliographic Info

Paper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 2000-18.

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Length: 10 pages
Date of creation: 2000
Date of revision:
Publication status: Published in Econmics Letters, 2002, 74, pp. 187-194.
Handle: RePEc:del:abcdef:2000-18

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Keywords: RISK ; MANAGEMENT ; WEALTH;

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References

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  1. Martin Browning & Annamaria Lusardi, 1995. "Household Saving: Micro Theories and Micro Facts," Department of Economics Working Papers 1995-02, McMaster University.
  2. Arrondel, L. & Laferrere, A., 1998. "Taxation and Wealth Transmission in France," DELTA Working Papers 98-13, DELTA (Ecole normale supérieure).
  3. Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
  4. Christopher D. Carroll & Andrew A. Samwick, 1995. "How Important is Precautionary Saving?," NBER Working Papers 5194, National Bureau of Economic Research, Inc.
  5. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November.
  6. Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
  7. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  8. Dreze, Jacques, 1972. "Consumption decisions under uncertainty," Open Access publications from Université catholique de Louvain info:hdl:2078.1/87508, Université catholique de Louvain.
  9. Lusardi, Annamaria, 1998. "On the Importance of the Precautionary Saving Motive," American Economic Review, American Economic Association, vol. 88(2), pages 449-53, May.
  10. Lusardi, Annamaria, 1997. "Precautionary saving and subjective earnings variance," Economics Letters, Elsevier, vol. 57(3), pages 319-326, December.
  11. Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, vol. 81(4), pages 859-71, September.
  12. André Masson & Luc Arrondel, 1996. "Gestion du risque et comportements patrimoniaux," Économie et Statistique, Programme National Persée, vol. 296(1), pages 63-89.
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Citations

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Cited by:
  1. Luis Diaz-Serrano, 2005. "Income Volatility and Residential Mortgage Delinquency: Evidence from 12 EU countries," Economics, Finance and Accounting Department Working Paper Series n1530205, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  2. Johannes Geyer, 2011. "The Effect of Health and Employment Risks on Precautionary Savings," Discussion Papers of DIW Berlin 1167, DIW Berlin, German Institute for Economic Research.
  3. Arrondel, Luc & Savignac, Frédérique, . "Stockholding : Does housing wealth matter ?," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/8576, Université Paris-Dauphine.
  4. Arthur Kennickell & Annamaria Lusardi, 2006. "Disentangling the Importance of the Precautionary Saving Motive," CFS Working Paper Series 2006/15, Center for Financial Studies.
  5. Luc Arrondel & Hector Calvo Pardo & Xisco Oliver, 2007. "Temperant portfolio choice and background risk: evidence from France," Working Papers halshs-00588069, HAL.
  6. Lisa R. Anderson & Jennifer M. Mellor, 2007. "Predicting Health Behaviors with an Experimental Measure of Risk Preference," Working Papers 59, Department of Economics, College of William and Mary.
  7. Lothar Essig, 2005. "Precautionary saving and old-age provisions: Do subjective saving motive measures work?," MEA discussion paper series 05084, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  8. Erik Hurst & Arthur Kennickell & Annamaria Lusardi & Francisco Torralba, 2006. "Precautionary Savings and the Importance of Business Owners," CFS Working Paper Series 2006/16, Center for Financial Studies.
  9. Arthur Kennickell & Annamaria Lusardi, 2004. "Disentangling the Importance of the Precautionary Saving Mode," NBER Working Papers 10888, National Bureau of Economic Research, Inc.
  10. Diaz-Serrano, Luis, 2005. "Income volatility and residential mortgage delinquency across the EU," Journal of Housing Economics, Elsevier, vol. 14(3), pages 153-177, September.
  11. Jin, Ling & Chen, Kevin Z. & Yu, Bingxin & Huang, Zuhui, 2011. "How prudent are rural households in developing transition economies:," IFPRI discussion papers 1127, International Food Policy Research Institute (IFPRI).
  12. Luc Arrondel & Hector Calvo Pardo, 2008. "Les Français sont-ils prudents ? Patrimoine et risque sur les revenus des ménages," PSE Working Papers halshs-00585994, HAL.
  13. Luc Arrondel & Hector Calvo Pardo, 2008. "Les Français sont-ils prudents ? Patrimoine et risque sur les revenus des ménages," Working Papers halshs-00585994, HAL.
  14. Diaz-Serrano, Luis, 2004. "Income Volatility and Residential Mortgage Delinquency: Evidence from 12 EU Countries," IZA Discussion Papers 1396, Institute for the Study of Labor (IZA).
  15. Essig, Lothar, 2004. "Precautionary saving and old-age provisions: Do subjective saving motives measures work?," Sonderforschungsbereich 504 Publications 05-22, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.

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