Precautionary and Entrepreneurial Saving: New Evidence from German Households
AbstractThe 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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Bibliographic InfoPaper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 240.
Length: 31 p.
Date of creation: 2009
Date of revision:
precautionary saving; precautionary wealth; entrepreneurship;
Other versions of this item:
- Frank M. Fossen & Davud Rostam-Afschar, 2013. "Precautionary and Entrepreneurial Savings: New Evidence from German Households," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(4), pages 528-555, 08.
- Frank M. Fossen & Davud Rostam-Afschar, 2009. "Precautionary and Entrepreneurial Saving: New Evidence from German Households," Discussion Papers of DIW Berlin 920, DIW Berlin, German Institute for Economic Research.
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-12-11 (Economics of Ageing)
- NEP-ALL-2009-12-11 (All new papers)
- NEP-ENT-2009-12-11 (Entrepreneurship)
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- Johannes Geyer, 2011.
"The Effect of Health and Employment Risks on Precautionary Savings,"
SOEPpapers on Multidisciplinary Panel Data Research
408, DIW Berlin, The German Socio-Economic Panel (SOEP).
- 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.
- 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.
- 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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