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Risk management and wealth accumulation behavior in France

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  • Arrondel, Luc

Abstract

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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  • Arrondel, Luc, 2002. "Risk management and wealth accumulation behavior in France," Economics Letters, Elsevier, vol. 74(2), pages 187-194, January.
  • Handle: RePEc:eee:ecolet:v:74:y:2002:i:2:p:187-194
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    11. Lusardi, Annamaria, 1998. "On the Importance of the Precautionary Saving Motive," American Economic Review, American Economic Association, vol. 88(2), pages 449-453, May.
    12. A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 353-360.
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    Cited by:

    1. Dedah, Cheikhna O. & Mishra, Ashok K., 2009. "Precautionary wealth among U.S farm households," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46606, Southern Agricultural Economics Association.
    2. Rabitsch, Katrin & Schoder, Christian, 2016. "Buffer stock savings in a New-Keynesian business cycle model," FinMaP-Working Papers 64, Collaborative EU Project FinMaP - Financial Distortions and Macroeconomic Performance: Expectations, Constraints and Interaction of Agents.
    3. Luc Arrondel & Hector Calvo Pardo, 2008. "Les Français sont-ils prudents ? Patrimoine et risque sur les revenus des ménages," Working Papers halshs-00585994, HAL.
    4. Diaz-Serrano, Luis, 2004. "Income Volatility and Residential Mortgage Delinquency: Evidence from 12 EU Countries," IZA Discussion Papers 1396, Institute for the Study of Labor (IZA).
    5. Lothar Essig, 2005. "Precautionary saving and old-age provisions: Do subjective saving motive measures work?," MEA discussion paper series 05084, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    6. Diaz-Serrano, Luis, 2005. "Income volatility and residential mortgage delinquency across the EU," Journal of Housing Economics, Elsevier, vol. 14(3), pages 153-177, September.
    7. Servaas Deroose (Editor), 2006. "Assessing the factors of resilience of private consumption in the euro area," European Economy - Economic Papers 2008 - 2015 252, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    8. Jin, Ling & Chen, Kevin Z. & Yu, Bingxin & Huang, Zuhui, 2011. "How prudent are rural households in developing transition economies:," IFPRI discussion papers 1127, International Food Policy Research Institute (IFPRI).
    9. Essig, Lothar, 2005. "Precautionary saving and old-age provisions : do subjective saving motives measures work?," Papers 05-22, Sonderforschungsbreich 504.
    10. Raquel Fonseca & Thepthida Sopraseuth, 2015. "Distributional Effects of Social Security Reforms: the Case of France," Cahiers de recherche 1515, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    11. Anderson, Lisa R. & Mellor, Jennifer M., 2008. "Predicting health behaviors with an experimental measure of risk preference," Journal of Health Economics, Elsevier, vol. 27(5), pages 1260-1274, September.
    12. repec:dau:papers:123456789/8576 is not listed on IDEAS
    13. Arrondel, L. & Savignac, F., 2009. "Stockholding: Does housing wealth matter?," Working papers 266, Banque de France.
    14. Essig, Lothar, 2004. "Precautionary saving and old-age provisions: Do subjective saving motives measures work?," Sonderforschungsbereich 504 Publications 05-22, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    15. repec:hal:journl:halshs-00178465 is not listed on IDEAS
    16. Erik Hurst & Arthur Kennickell & Annamaria Lusardi & Francisco Torralba, 2005. "Precautionary Savings and the Importance of Business Owners," NBER Working Papers 11731, National Bureau of Economic Research, Inc.
    17. Arthur Kennickell & Annamaria Lusardi, 2004. "Disentangling the Importance of the Precautionary Saving Mode," NBER Working Papers 10888, National Bureau of Economic Research, Inc.
    18. Johannes Geyer, 2011. "The Effect of Health and Employment Risks on Precautionary Savings," SOEPpapers on Multidisciplinary Panel Data Research 408, DIW Berlin, The German Socio-Economic Panel (SOEP).
    19. Ashok Mishra & Hiroki Uematsu & J. Matthew Fannin, 2013. "Measuring precautionary wealth using cross-sectional data: the case of farm households," Review of Economics of the Household, Springer, vol. 11(1), pages 131-141, March.
    20. Arrondel, Luc & Calvo-Pardo, Hector, 2014. "Endogenous non-tradable earnings and households’ demand for risky assets," Discussion Paper Series In Economics And Econometrics 1414, Economics Division, School of Social Sciences, University of Southampton.
    21. Luc Arrondel & Hector Calvo Pardo, 2008. "Les Français sont-ils prudents ? Patrimoine et risque sur les revenus des ménages," PSE Working Papers halshs-00585994, HAL.
    22. Luc Arrondel & Hector Calvo Pardo & Xisco Oliver, 2007. "Temperant portfolio choice and background risk: evidence from France," Working Papers halshs-00588069, HAL.
    23. repec:dau:papers:123456789/6826 is not listed on IDEAS
    24. Dedah, Cheikhna O. & Mishra, Ashok K., 2009. "Permanent Income and the Importance of Precautionary Savings: An Instrumental Variable Approach," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49522, Agricultural and Applied Economics Association.

    More about this item

    JEL classification:

    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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