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

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  • Clemente De Lucia

    (Ministry of Economics and Finance)

  • Mara Meacci

    ()
    (Ministry of Economics and Finance)

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    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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    File URL: http://lipari.istat.it/digibib/Working_Papers/WP_54_2005_DeLucia_Meacci.pdf
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    Bibliographic Info

    Paper provided by ISTAT - Italian National Institute of Statistics - (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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    Related research

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

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    1. Andrew Benito, 2002. "Does Job Insecurity Affect Household Consumption?," Banco de Espa�a Working Papers 0225, Banco de Espa�a.
    2. Caballero, R.J., 1988. "Consumption Puzzles And Precautionary Savings," Discussion Papers 1988_05, Columbia University, Department of Economics.
    3. Christopher D Carroll & Karen E Dynan & Spencer D Krane, 1999. "Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets," Economics Working Paper Archive 416, The Johns Hopkins University,Department of Economics.
    4. Joshua D. Angrist & Alan B. Krueger, 1990. "The Effect of Age at School Entry on Educational Attainment: An Application of Instrumental Variables with Moments from Two Samples," NBER Working Papers 3571, National Bureau of Economic Research, Inc.
    5. Carroll, Christopher D. & Weil, David N., 1994. "Saving and growth: a reinterpretation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 133-192, June.
    6. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November.
    7. 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.
    8. 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.
    9. 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.
    10. 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.
    11. Bagliano, Fabio-Cesare & Bertola, Giuseppe, 2007. "Models for Dynamic Macroeconomics," OUP Catalogue, Oxford University Press, number 9780199228324, September.
    12. 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.).
    13. Lusardi, Annamaria, 1997. "Precautionary saving and subjective earnings variance," Economics Letters, Elsevier, vol. 57(3), pages 319-326, December.
    14. 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.
    15. Newey, Whitney K. & McFadden, Daniel, 1986. "Large sample estimation and hypothesis testing," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 36, pages 2111-2245 Elsevier.
    16. Dynan, Karen E, 1993. "How Prudent Are Consumers?," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1104-13, December.
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