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Saving behaviour and earnings uncertainty: Evidence from the British Household Panel Survey

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  • Alessandra Guariglia

    () (Department of Economics, Keynes College, University of Kent at Canterbury, Canterbury, CT2 7NP, United Kingdom)

Abstract

For the first time, this paper uses a panel data set, the British Household Panel Survey, to analyse saving behaviour in Britain. One objective is to test the precautionary saving hypothesis, according to which households save to self-insure against uncertainty. Our results show that in accordance with this hypothesis, various measures of uncertainty based on earnings variability have a statistically significant effect on households' saving decisions. Moreover, in accordance with the life cycle model, households save more if they expect their financial situation to deteriorate.

Suggested Citation

  • Alessandra Guariglia, 2001. "Saving behaviour and earnings uncertainty: Evidence from the British Household Panel Survey," Journal of Population Economics, Springer;European Society for Population Economics, vol. 14(4), pages 619-634.
  • Handle: RePEc:spr:jopoec:v:14:y:2001:i:4:p:619-634 Note: Received: 15 June 1999/Accepted: 4 January 2001
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    1. Barsky R. & Bound J. & Charles K.K. & Lupton J.P., 2002. "Accounting for the Black-White Wealth Gap: A Nonparametric Approach," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 663-673, September.
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    Cited by:

    1. repec:kap:iaecre:v:12:y:2006:i:3:p:298-307 is not listed on IDEAS
    2. Klos, Alexander & Rottke, Simon, 2013. "Saving and Consumption When Children Move Out," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79786, Verein für Socialpolitik / German Economic Association.
    3. Brown, Sarah & Taylor, Karl, 2014. "Household finances and the ‘Big Five’ personality traits," Journal of Economic Psychology, Elsevier, pages 197-212.
    4. Patti Fisher & Catherine Montalto, 2011. "Loss Aversion and Saving Behavior: Evidence from the 2007 U.S. Survey of Consumer Finances," Journal of Family and Economic Issues, Springer, vol. 32(1), pages 4-14, March.
    5. Manuela Deidda, 2014. "Precautionary saving under liquidity constraints: evidence from Italy," Empirical Economics, Springer, pages 329-360.
    6. Asako OHINATA & Matteo PICCHIO, 2015. "The Financial Support for Long-Term Elderly Care and Household Savings Behaviour," Working Papers 411, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    7. Lugilde, Alba & Bande, Roberto & Riveiro, Dolores, 2016. "Precautionary saving in Spain during the Great Recession: evidence from a panel of uncertainty indicators," MPRA Paper 72436, University Library of Munich, Germany.
    8. Guariglia, Alessandra & Rossi, Mariacristina, 2004. "Private medical insurance and saving: evidence from the British Household Panel Survey," Journal of Health Economics, Elsevier, pages 761-783.
    9. Brown, Sarah & Taylor, Karl, 2016. "Early influences on saving behaviour: Analysis of British panel data," Journal of Banking & Finance, Elsevier, vol. 62(C), pages 1-14.
    10. Lugilde, Alba & Bande, Roberto & Riveiro, Dolores, 2017. "Precautionary Saving: a review of the theory and the evidence," MPRA Paper 77511, University Library of Munich, Germany.
    11. Khanal, Aditya & Mishra, Ashok, 2016. "Income Risk, Habit Formation, and Precautionary Savings: The Case of Rural Households," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235597, Agricultural and Applied Economics Association.
    12. Brown, Sarah & Ghosh, Pulak & Pareek, Bhuvanesh & Taylor, Karl, 2017. "Financial Hardship and Saving Behaviour: Bayesian Analysis of British Panel Data," IZA Discussion Papers 10910, Institute for the Study of Labor (IZA).
    13. repec:nsr:niesrd:287 is not listed on IDEAS
    14. Marcus Klemm, 2012. "Job Security Perceptions and the Saving Behavior of German Households," Ruhr Economic Papers 0380, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    15. David Bywaters & D. Thomas, 2006. "Consumption, Wealth, and Indebtedness in the Context of Uncertainty: The Consumption Function Meets Portfolio Theory," International Advances in Economic Research, Springer;International Atlantic Economic Society, pages 298-307.
    16. repec:zbw:rwirep:0380 is not listed on IDEAS
    17. repec:eee:touman:v:39:y:2013:i:c:p:37-49 is not listed on IDEAS
    18. Evren Ceritoğlu, 2013. "The impact of labour income risk on household saving decisions in Turkey," Review of Economics of the Household, Springer, vol. 11(1), pages 109-129, March.
    19. Sarah Brown & Karl Taylor, 2006. "Financial expectations, consumption and saving: a microeconomic analysis," Fiscal Studies, Institute for Fiscal Studies, pages 313-338.
    20. Sarah Brown & Karl Taylor, 2006. "Financial expectations, consumption and saving: a microeconomic analysis," Fiscal Studies, Institute for Fiscal Studies, pages 313-338.
    21. Klemm, Marcus, 2012. "Job Security Perceptions and the Saving Behavior of German Households," Ruhr Economic Papers 380, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    Keywords

    Precautionary saving; uncertainty; earnings variability;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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