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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. Jonathan S. Skinner, 1987. "Risky Income, Life Cycle Consumption, and Precautionary Savings," NBER Working Papers 2336, National Bureau of Economic Research, Inc.
  2. Wolfgang Hardle & Oliver Linton, 1994. "Applied Nonparametric Methods," Cowles Foundation Discussion Papers 1069, Cowles Foundation for Research in Economics, Yale University.
  3. Das, J.W.M. & van Soest, A.H.O., 1996. "A panel data model for subjective information on household income growth," Other publications TiSEM a6683363-b5a6-4fe7-b062-7, Tilburg University, School of Economics and Management.
  4. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
  5. 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.).
  6. Das, J.W.M. & van Soest, A.H.O., 1997. "Expected and realized income changes : Evidence from the Dutch socio-economic panel," Other publications TiSEM bdbe10dd-649c-4521-ab28-7, Tilburg University, School of Economics and Management.
  7. 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.
  8. 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.
  9. James Banks & Richard Blundell & Agar Brugiavini, 1995. "Income uncertainty and consumption growth in the UK," IFS Working Papers W95/13, Institute for Fiscal Studies.
  10. Giucca, P. & Jappelli, T. & Terlizzese, D., 1992. "Earning Uncertainty and Precautionary Saving," Papers 161, Banca Italia - Servizio di Studi.
  11. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
  12. 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.
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