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Unemployment risk and buffer-stock saving: An empirical investigation in Japan

  • Bessho, Shun-ichiro
  • Tobita, Eiko

The purpose of this paper is to investigate, using micro data, the strength in Japan of the precautionary saving motive. While numerical simulations suggest the economic importance of precautionary saving, the empirical evidence is mixed. In this paper, we apply the buffer-stock saving model and focus on the effect of unemployment risk on wealth accumulation. We find that uncertainty has a positive and statistically significant effect on the wealth-to-income ratio, and that buffer-stock savings account for 6 or 15 percent of net financial assets. Housing loans and expenditures associated with children decrease this ratio.

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Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 20 (2008)
Issue (Month): 3 (August)
Pages: 303-325

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Handle: RePEc:eee:japwor:v:20:y:2008:i:3:p:303-325
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