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Precautionary Saving and the Accumulation Of Wealth


  • Annamaria Lusardi


In this paper, I estimate the extent of precautionary accumulation using data from a new survey: the US Health and Retirement Study, which samples older households. I account for many determinants of wealth, not only past economic circumstances and expectations about future resources, but also individual preferences, such as risk aversion and impatience. In addition and most importantly, I account for risk using subjective data on the probability of job loss in the future. I find evidence in favor of precautionary saving. While the precautionary saving motive does not give rise to a lot of wealth, many households make provisions to insure against earnings risk. Thus, precautionary saving continues to affect accumulation even at late stages of the life cycle.

Suggested Citation

  • Annamaria Lusardi, 2000. "Precautionary Saving and the Accumulation Of Wealth," JCPR Working Papers 204, Northwestern University/University of Chicago Joint Center for Poverty Research.
  • Handle: RePEc:wop:jopovw:204

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    References listed on IDEAS

    1. Caballero, Ricardo J., 1990. "Consumption puzzles and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 113-136, January.
    2. Christopher D. Carroll, 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 1-55.
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    Cited by:

    1. Schunk, Daniel, 2007. "What determines the saving behavior of German households? : an examination of saving motives and saving decisions," Papers 07-10, Sonderforschungsbreich 504.
    2. Lothar Essig, 2005. "Precautionary saving and old-age provisions: Do subjective saving motive measures work?," MEA discussion paper series 05084, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    3. Servaas Deroose (Editor), 2006. "Assessing the factors of resilience of private consumption in the euro area," European Economy - Economic Papers 2008 - 2015 252, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Annamaria Lusardi, 2002. "Saving Viewed from a Cross-National Perspective," MEA discussion paper series 02024, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    5. Essig, Lothar, 2004. "Precautionary saving and old-age provisions: Do subjective saving motives measures work?," Sonderforschungsbereich 504 Publications 05-22, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    6. Abdul Jalil, Ahmad Zafarullah, 2009. "The importance of precautionary saving motive among Indonesian households," MPRA Paper 25189, University Library of Munich, Germany.
    7. Arthur Kennickell & Annamaria Lusardi, 2004. "Disentangling the Importance of the Precautionary Saving Mode," NBER Working Papers 10888, National Bureau of Economic Research, Inc.
    8. Schunk Daniel, 2009. "What Determines Household Saving Behavior: An Examination of Saving Motives and Saving Decisions 06.01.2009," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(4), pages 467-491, August.

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