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Risk management and wealth accumulation behavior in France

  • Arrondel, Luc

In a prevailing climate of increasing uncertainty (rising risk of unemployment, pension funding problems and unstable family structures), French households have adopted new saving behavior reflected during the nineties, primarily by considerable investment in life insurance products (representing more than 50 percent of financial saving). Recent theoretical saving models have placed greater emphasis on studying prudent behavior in the face of an uncertain future and have shown the influences of multiple risks and borrowing constraints on precautionary savings and portfolio choices. In this vein, a household exposed to a high future income risk or strong liquidity constraints may increase its savings, reduce its investments in risky assets and increase its share of liquid investments. In this paper, wealth accumulation and their relation to these new factors will be specifically studied. Empirical tests on recent French data ("Patrimoine 97") show the relevance of subjective earnings variance to explain wealth accumulation but its contribution is not very large.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 74 (2002)
Issue (Month): 2 (January)
Pages: 187-194

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Handle: RePEc:eee:ecolet:v:74:y:2002:i:2:p:187-194
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Martin Browning & Annamaria Lusardi, 1995. "Household Saving: Micro Theories and Micro Facts," Department of Economics Working Papers 1995-02, McMaster University.
  2. Arrondel, Luc & Laferrere, Anne, 2001. "Taxation and wealth transmission in France," Journal of Public Economics, Elsevier, vol. 79(1), pages 3-33, January.
  3. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings Uncertainty and Precautionary Saving," CEPR Discussion Papers 699, C.E.P.R. Discussion Papers.
  4. Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December.
  5. Lusardi, Annamaria, 1998. "On the Importance of the Precautionary Saving Motive," American Economic Review, American Economic Association, vol. 88(2), pages 449-53, May.
  6. André Masson & Luc Arrondel, 1996. "Gestion du risque et comportements patrimoniaux," Économie et Statistique, Programme National Persée, vol. 296(1), pages 63-89.
  7. Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, vol. 81(4), pages 859-71, September.
  8. Christopher D. Carroll & Andrew A. Samwick, 1998. "How Important Is Precautionary Saving?," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 410-419, August.
  9. Jonathan S. Skinner, 1987. "Risky Income, Life Cycle Consumption, and Precautionary Savings," NBER Working Papers 2336, National Bureau of Economic Research, Inc.
  10. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
  11. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  12. Lusardi, Annamaria, 1997. "Precautionary saving and subjective earnings variance," Economics Letters, Elsevier, vol. 57(3), pages 319-326, December.
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