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Precautionary and Entrepreneurial Saving: New Evidence from German Households

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Author Info

  • Frank M. Fossen
  • Davud Rostam-Afschar

Abstract

The well-documented positive correlation between income risk and wealth was interpreted as evidence for high amounts of precautionary wealth in various studies. However, the large estimates emerged from pooling non-entrepreneurs and entrepreneurs without controlling for heterogeneity. This paper provides evidence for Germany based on representative panel data including private wealth balance sheets. Entrepreneurs, who face high income risk, hold more wealth than employees, but it is shown that this is not due to precautionary motives. Entrepreneurs may rather save for old age, as they are usually not covered by statutory pension insurance. The analysis accounts for endogeneity of entrepreneurial choice.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.344134.de/diw_sp0240.pdf
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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 240.

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Length: 31 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp240

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Related research

Keywords: precautionary saving; precautionary wealth; entrepreneurship;

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Cited by:
  1. 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.
  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. Luigi Bonatti & Andrea Fracasso, 2012. "A Germans’ dilemma: save the euro or preserve their socio-economic model," Department of Economics Working Papers 1207, Department of Economics, University of Trento, Italia.

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