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Saving Behavior under the Influence of Income Risk: An Experimental Study

Author

Listed:
  • Tomoki Kitamura

    (NLI-Research Institute and Graduate School of International Management, Aoyama Gakuin University)

  • Yasuhiro Yonezawa

    (Graduate School of Finance, Accounting and Law, Waseda University)

  • Munenori Nakasato

    (Graduate School of International Management, Aoyama Gakuin University)

Abstract

Individual subjects are experimentally tested for precautionary saving. We use a simplified experimental framework and decision supporting tool to show that subject's consumption is consistent with precautionary saving. We find that subjects overact in changing current income. However, those over-reactions cancel each other, and subject's consumption behavior is close to the optimal solutions on average.

Suggested Citation

  • Tomoki Kitamura & Yasuhiro Yonezawa & Munenori Nakasato, 2010. "Saving Behavior under the Influence of Income Risk: An Experimental Study," Economics Bulletin, AccessEcon, vol. 30(2), pages 967-974.
    • Handle: RePEc:ebl:ecbull:eb-10-00153
    as

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    References listed on IDEAS

    as
    1. Enrica Carbone & John D. Hey, 2004. "The effect of unemployment on consumption: an experimental analysis," Economic Journal, Royal Economic Society, vol. 114(497), pages 660-683, July.
    2. Lusardi, Annamaria, 1998. "On the Importance of the Precautionary Saving Motive," American Economic Review, American Economic Association, vol. 88(2), pages 449-453, May.
    3. Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(3), pages 465-473.
    4. T. Parker Ballinger & Michael G. Palumbo & Nathaniel T. Wilcox, 2003. "Precautionary saving and social learning across generations: an experiment," Economic Journal, Royal Economic Society, vol. 113(490), pages 920-947, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Precautionary Saving; Experiment;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior

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