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Expectations and Saving Behavior: An Empirical Analysis

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  • Stefan Arent

Abstract

In this paper we analyze the impact of the expectations about future labor income on the saving behavior of German households. We measure expectations on an individual basis instead of generalized risk measures as it is common in existing studies. We use a unique panel data set on household savings. We find that that a higher unemployment expectation significantly decreases savings. However, we are not able to identify a significant relationship between general future income expectations and savings. Moreover, we find that good health expectations increase savings in Western Germany, but decrease the savings in Eastern Germany.

Suggested Citation

  • Stefan Arent, 2012. "Expectations and Saving Behavior: An Empirical Analysis," ifo Working Paper Series 128, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_128
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    File URL: http://www.cesifo-group.de/DocDL/IfoWorkingPaper-128.pdf
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    References listed on IDEAS

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    1. Christopher D. Carroll & Karen E. Dynan & Spencer D. Krane, 2003. "Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 586-604, August.
    2. Eeckhoudt, Louis & Schlesinger, Harris, 2008. "Changes in risk and the demand for saving," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1329-1336, October.
    3. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1996. "Income Risk, Borrowing Constraints, and Portfolio Choice," American Economic Review, American Economic Association, vol. 86(1), pages 158-172, March.
    4. Hornung, Erik, 2012. "Railroads and Micro-regional Growth in Prussia," CAGE Online Working Paper Series 80, Competitive Advantage in the Global Economy (CAGE).
    5. Lusardi, Annamaria, 1997. "Precautionary saving and subjective earnings variance," Economics Letters, Elsevier, vol. 57(3), pages 319-326, December.
    6. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    7. Ekern, Steinar, 1980. "Increasing Nth degree risk," Economics Letters, Elsevier, vol. 6(4), pages 329-333.
    8. Stefan Arent & Alexander Eck & Michael Weber & Oskar Krohmer, 2012. "Income Risk, Saving and Taxation: Will Precautionary Saving Survive?," ifo Working Paper Series 125, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    9. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 2002. "An Empirical Analysis of Earnings and Employment Risk," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 241-253, April.
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    Cited by:

    1. Antelo, Manel & Magdalena, Pilar & Reboredo, Juan C., 2017. "Economic crisis and the unemployment effect on household food expenditure: The case of Spain," Food Policy, Elsevier, vol. 69(C), pages 11-24.
    2. Thomas Triebs & Subal C. Kumbhakar, 2012. "Management Practice in Production," ifo Working Paper Series 129, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    3. 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.
    4. Stefan Arent, 2012. "Erwartungen und Sparen: wie wirken Arbeitslosigkeits- und Gesundheitserwartungen auf die Sparentscheidung von Haushalten?," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 19(02), pages 13-18, April.
    5. 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.
    6. repec:zbw:rwirep:0380 is not listed on IDEAS

    More about this item

    Keywords

    Income expectations; unemployment expectations; health expectations; saving behavior; savings;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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