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Precautionary Saving and the Accumulation Of Wealth

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  • Annamaria Lusardi
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    Abstract

    In this paper, I estimate the extent of precautionary accumulation using data from a new survey: the US Health and Retirement Study, which samples older households. I account for many determinants of wealth, not only past economic circumstances and expectations about future resources, but also individual preferences, such as risk aversion and impatience. In addition and most importantly, I account for risk using subjective data on the probability of job loss in the future. I find evidence in favor of precautionary saving. While the precautionary saving motive does not give rise to a lot of wealth, many households make provisions to insure against earnings risk. Thus, precautionary saving continues to affect accumulation even at late stages of the life cycle.

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    Bibliographic Info

    Paper provided by Northwestern University/University of Chicago Joint Center for Poverty Research in its series JCPR Working Papers with number 204.

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    Date of creation: 22 Aug 2000
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    Handle: RePEc:wop:jopovw:204

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Christopher D. Carroll, 1996. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," NBER Working Papers 5788, National Bureau of Economic Research, Inc.
    2. Caballero, Ricardo J., 1990. "Consumption puzzles and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 113-136, January.
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    Cited by:
    1. Arthur Kennickell & Annamaria Lusardi, 2004. "Disentangling the Importance of the Precautionary Saving Mode," NBER Working Papers 10888, National Bureau of Economic Research, Inc.
    2. Abdul Jalil, Ahmad Zafarullah, 2009. "The importance of precautionary saving motive among Indonesian households," MPRA Paper 25189, University Library of Munich, Germany.
    3. Daniel Schunk, 2009. "What Determines Household Saving Behavior? An Examination of Saving Motives and Saving Decisions," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(4), pages 467-491, August.
    4. Annamaria Lusardi, 2002. "Saving Viewed from a Cross-National Perspective," MEA discussion paper series 02024, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.

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