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How Certain Are Dutch Households about Future Income? An Empirical Analysis

  • Das, Marcel
  • Donkers, Bas

The precautionary saving literature shows that income uncertainty increases savings and wealth. To estimate the magnitude of this effect, we need a measure of income uncertainty. This paper empirically analyzes subjective income uncertainty in The Netherlands. Data come from a large Dutch household survey. We measure income uncertainty by asking questions on expected household income in the next twelve months. First, we describe the data and investigate the relationship between the measure of income uncertainty and a number of household characteristics. Controlling for information on expected income changes, we find strong relationships between labor-market characteristics and the subjective income uncertainty as reported by the heads of the households. Second, we compare income uncertainty in The Netherlands with income uncertainty in the U.S. and Italy. It becomes evident that perceived income uncertainty is smaller in The Netherlands than it is in the U.S. Copyright 1999 by The International Association for Research in Income and Wealth.

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Article provided by International Association for Research in Income and Wealth in its journal Review of Income & Wealth.

Volume (Year): 45 (1999)
Issue (Month): 3 (September)
Pages: 325-38

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Handle: RePEc:bla:revinw:v:45:y:1999:i:3:p:325-38
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  1. Das, J.W.M. & van Soest, A.H.O., 1995. "Expected and realized income changes : Evidence from the Dutch socio-economic panel," Discussion Paper 1995-52, Tilburg University, Center for Economic Research.
  2. Zeldes, Stephen P, 1989. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 275-98, May.
  3. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1996. "Income Risk, Borrowing Constraints, and Portfolio Choice," American Economic Review, American Economic Association, vol. 86(1), pages 158-72, March.
  4. Oliver LINTON, . "Applied nonparametric methods," Statistic und Oekonometrie 9312, Humboldt Universitaet Berlin.
  5. James Banks & Richard Blundell & Agar Brugiavini, 1995. "Income uncertainty and consumption growth in the UK," IFS Working Papers W95/13, Institute for Fiscal Studies.
  6. Das, Marcel & van Soest, Arthur, 1999. "A panel data model for subjective information on household income growth," Journal of Economic Behavior & Organization, Elsevier, vol. 40(4), pages 409-426, December.
  7. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
  8. Christopher D. Carroll, 1992. "How does future income affect current consumption?," Working Paper Series / Economic Activity Section 126, Board of Governors of the Federal Reserve System (U.S.).
  9. Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
  10. Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
  11. repec:ner:tilbur:urn:nbn:nl:ui:12-121744 is not listed on IDEAS
  12. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
  13. Härdle, W.K., 1992. "Applied Nonparametric Methods," Discussion Paper 1992-6, Tilburg University, Center for Economic Research.
  14. repec:dgr:kubcen:199675 is not listed on IDEAS
  15. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings Uncertainty and Precautionary Saving," CEPR Discussion Papers 699, C.E.P.R. Discussion Papers.
  16. repec:ner:tilbur:urn:nbn:nl:ui:12-121740 is not listed on IDEAS
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