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How Certain are Dutch Households about Future Income? An Empirical Analysis

Author

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  • Das, J.W.M.

    (Tilburg University, Center For Economic Research)

  • Donkers, A.C.D.

Abstract

The precautionary saving literature shows that income uncertainty increases savings and wealth. To estimate the magnitude of this effect, we need a measure of income uncertainty. This paper empirically analyzes subjective income uncertainty in The Netherlands. Data come from a large Dutch household survey. We measure income uncertainty by asking questions on expected household income in the next twelve months. First, we describe the data and investigate the relationship between the measure of income uncertainty and a number of household characteristics. Controlling for information on expected income changes, we find strong relationships between labor‐market characteristics and the subjective income uncertainty as reported by the heads of the households. Second, we compare income uncertainty in The Netherlands with income uncertainty in the U.S. and Italy. It becomes evident that perceived income uncertainty is smaller in The Netherlands than it is in the U.S.
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Suggested Citation

  • Das, J.W.M. & Donkers, A.C.D., 1997. "How Certain are Dutch Households about Future Income? An Empirical Analysis," Discussion Paper 1997-38, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:d8aabd66-ddc7-4834-a157-ee7bddaee466
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    References listed on IDEAS

    as
    1. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    2. Das, Marcel & van Soest, Arthur, 1997. "Expected and realized income changes: Evidence from the Dutch socio-economic panel," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 137-154, January.
    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. Stephen P. Zeldes, 1989. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 275-298.
    5. Hardle, Wolfgang & Linton, Oliver, 1986. "Applied nonparametric methods," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.),Handbook of Econometrics, edition 1, volume 4, chapter 38, pages 2295-2339, Elsevier.
    6. Christopher D. Carroll, 1994. "How does Future Income Affect Current Consumption?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 111-147.
    7. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November.
    8. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
    9. Das, Marcel & van Soest, Arthur, 1999. "A panel data model for subjective information on household income growth," Journal of Economic Behavior & Organization, Elsevier, vol. 40(4), pages 409-426, December.
    10. J. Dominitz & C. F. Manski, "undated". "Using expectations data to study subjective income expectations," Institute for Research on Poverty Discussion Papers 1050-94, University of Wisconsin Institute for Research on Poverty.
    11. Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
    12. Hardle, Wolfgang & Linton, Oliver, 1986. "Applied nonparametric methods," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.),Handbook of Econometrics, edition 1, volume 4, chapter 38, pages 2295-2339, Elsevier.
    13. James Banks & Richard Blundell & Agar Brugiavini, 1995. "Income uncertainty and consumption growth in the UK," IFS Working Papers W95/13, Institute for Fiscal Studies.
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    Citations

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    Cited by:

    1. Charles F. Manski & John D. Straub, 2000. "Worker Perceptions of Job Insecurity in the Mid-1990s: Evidence from the Survey of Economic Expectations," Journal of Human Resources, University of Wisconsin Press, vol. 35(3), pages 447-479.
    2. Alessie, R.J.M. & Hochgürtel, S. & van Soest, A.H.O., 2000. "Household Portfolios in the Netherlands," Other publications TiSEM 673b1a55-43b3-4a04-8c6b-c, Tilburg University, School of Economics and Management.
    3. Kapteyn, Arie & Kleinjans, Kristin J. & van Soest, Arthur, 2009. "Intertemporal consumption with directly measured welfare functions and subjective expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 425-437, October.
    4. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 1998. "What Determines Earnings and Employment Risk," CEPR Discussion Papers 2043, C.E.P.R. Discussion Papers.
    5. Tullio Jappelli & Luigi Pistaferri, 2000. "The dynamics of household wealth accumulation in Italy," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 269-295, June.
    6. Kapteyn, Arie & Kleinjans, Kristin J. & van Soest, Arthur, 2009. "Intertemporal consumption with directly measured welfare functions and subjective expectations," Journal of Economic Behavior & Organization, Elsevier, pages 425-437.
    7. Jonathan Crook & Stefan Hochguertel, 2007. "US and European Household Debt and Credit Constraints," Tinbergen Institute Discussion Papers 07-087/3, Tinbergen Institute.
    8. Carlos Madeira, 2020. "Measuring the perceived value of an MBA degree," Working Papers Central Bank of Chile 876, Central Bank of Chile.
    9. Das, J.W.M. & Dominitz, J. & van Soest, A.H.O., 1997. "Comparing Predictions and Outcomes : Theory and Application to Income Changes," Discussion Paper 1997-45, Tilburg University, Center for Economic Research.

    More about this item

    Keywords

    subjective information; income expectations; income uncertainty;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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