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Precautionary saving in Spain during the Great Recession: evidence from a panel of uncertainty indicators

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  • Lugilde, Alba
  • Bande, Roberto
  • Riveiro, Dolores

Abstract

The aim of this paper is to study empirically the effect of uncertainty on private consumption using a sample of Spanish households, and to check whether the appropriate measure of uncertainty varies with the macroeconomic context. Using data provided by the Spanish Survey of Household Finances (EFF) and the Labour Force Survey (LFS) we construct several uncertainty measures commonly used in the literature and an additional indicator based on job insecurity data and estimate different econometric models under the life-cycle/permanent income hypothesis, using these measures of uncertainty. Our results are twofold: first, we find evidence in favour of the precautionary saving hypothesis. Secondly, we find that the sources of uncertainty vary with the business cycle: the job insecurity indicator is an appropriate variable to approximate income uncertainty in any macroeconomic context, especially when the unemployment rate is low. When unemployment soars, however, it becomes the main uncertainty source for households, together with the degree of instability at the current job.

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  • 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.
  • Handle: RePEc:pra:mprapa:72436
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    2. Antonio Cutanda & Juan A. Sanchis, 2022. "Labour supply responses to income tax changes in Spain," Working Papers 2207, Department of Applied Economics II, Universidad de Valencia.
    3. Tran Nguyen Van, 2022. "Understanding Household Consumption Behaviour: What do we Learn from a Developing Country?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 22(4), pages 801-858, October.
    4. Bande, Roberto & Riveiro, Dolores & Ruiz, Freddy, 2021. "Does Uncertainty Affect Saving Decisions of Colombian Households? Evidence on Precautionary Saving," MPRA Paper 106771, University Library of Munich, Germany.
    5. Aneta M. Klopocka & Rumiana Gorska, 2021. "Forecasting Household Saving Rate with Consumer Confidence Indicator and its Components: Panel Data Analysis of 14 European Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 874-898.
    6. Brindusa Anghel & Cristina Barceló & Ernesto Villanueva, 2023. "The growth in permanent contracts and its potential impact on spending," Economic Bulletin, Banco de España, issue 2023/Q1.
    7. Lepinteur, Anthony & Yin, Rémi, 2022. "Does Economic Insecurity Reduce all Types of Expenditures?," GLO Discussion Paper Series 1060, Global Labor Organization (GLO).
    8. Sara Ayllón, 2019. "Job insecurity and fertility in Europe," Review of Economics of the Household, Springer, vol. 17(4), pages 1321-1347, December.
    9. Antonio Cutanda & Juan A. Sanchis-Llopis, 2023. "Human capital and the intertemporal substitution for leisure: empirical evidence for Spain," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 22(3), pages 377-396, September.
    10. Juan Alberto Sanchis Llopis & Antonio Cutanda, 2023. "Labour Supply Responses to Income Tax Changes in Spain," Hacienda Pública Española / Review of Public Economics, IEF, vol. 245(2), pages 71-94, June.
    11. Antonio Cutanda & Juan A. Sanchis-Llopis, 2021. "Joint estimation of intertemporal labor and consumption decisions: evidence from Spanish households headed by working men," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 611-629, December.
    12. Brindusa Anghel & Cristina Barceló & Ernesto Villanueva, 2019. "The household saving rate in Spain between 2007 and 2016: decomposition by population group and possible determinants," Economic Bulletin, Banco de España, issue DEC.
    13. Lugilde, Alba, 2018. "Does income uncertainty affect Spanish household consumption?," MPRA Paper 87110, University Library of Munich, Germany.
    14. 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.
    15. Antonio Cutanda & Juan A. Sanchis-Llopis, 2022. "Human capital and the intertemporal substitution for leisure: empirical evidence for Spain," Working Papers 2116, Department of Applied Economics II, Universidad de Valencia.
    16. Tsvetkova, Liudmila & Okhrimenko, Igor & Belousova, Tamara & Khuzhamov, Leonid, 2022. "Relationship and mutual influence between poverty and insurance in a developing insurance market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 36(C).

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    More about this item

    Keywords

    precautionary savings; macroeconomic uncertainty; consumption; EFF;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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