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Does job security matter for consumption? An analysis on Italian microdata

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Author Info
Clemente De Lucia (Ministry of Economics and Finance)
Mara Meacci () (Ministry of Economics and Finance)
Abstract

This paper investigates if labour income uncertainty, particularly as related to the development and diffusion of fixed and short-term work contracts, may have played a role in determining the recent decline of the marginal propensity to consume of Italian households. We analyse this issue in the framework of a standard precautionary saving model, proxing labour income uncertainty with subjective job security measures. Due to the lack of a unique dataset containing all the relevant information, we adopt a two-step two-sample procedure. Estimation results, based on cross-section data for the year 2000, point to a potentially substantial effect of job security perception on household’s nondurables consumption. Its actual capability to prompt aggregate consumption adjustments is however likely to be very limited.

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Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number 54.

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Length: 32 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:isa:wpaper:54

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Keywords: Consumption precautionary saving job security two-step twosample estimation. JEL Classification: D12 E21 C42.

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  1. Stephen Nickell & Patricia Jones & Glenda Quintini, 2002. "A Picture of Job Insecurity Facing British Men," Economic Journal, Royal Economic Society, vol. 112(476), pages 1-27, January. [Downloadable!] (restricted)
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  2. Karen E. Dynan, 1993. "How prudent are consumers?," Working Paper Series / Economic Activity Section 135, Board of Governors of the Federal Reserve System (U.S.).
  3. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November. [Downloadable!] (restricted)
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  4. Christopher D. Carroll & David N. Weil, 1993. "Saving and Growth: A Reinterpretation," NBER Working Papers 4470, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Christopher D. Carroll & Karen E. Dynan & Spencer D. Krane, 2003. "Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 586-604, 05. [Downloadable!] (restricted)
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  6. Lusardi, Annamaria, 1997. "Precautionary saving and subjective earnings variance," Economics Letters, Elsevier, vol. 57(3), pages 319-326, December. [Downloadable!] (restricted)
  7. Carroll, Christopher D, 1994. "How Does Future Income Affect Current Consumption?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 111-47, February. [Downloadable!] (restricted)
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  8. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February. [Downloadable!] (restricted)
  9. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 2002. "An Empirical Analysis of Earnings and Employment Risk," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 241-53, April.
  10. Dynan, Karen E, 1993. "How Prudent Are Consumers?," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1104-13, December. [Downloadable!] (restricted)
  11. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
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