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Buffer-stock savings and households' wealth response to income shocks

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  • Koeniger, Winfried
  • Fella, Giulio
  • Frache, Serafin

Abstract

We structurally estimate a buffer-stock savings model using panel data from the Italian Survey of Household Income and Wealth that contains information not only about income and consumption but also wealth. We exploit the information about wealth and the responses of wealth and consumption to income shocks over different time horizons to infer the degree of insurance against permanent and transitory income shocks. The estimated model implies that Italian households can insure 5-10% of a permanent shock and 90-95% of a transitory shock. The degree of insurance against permanent shocks is at the low end of the range of existing estimates for the U.S.

Suggested Citation

  • Koeniger, Winfried & Fella, Giulio & Frache, Serafin, 2016. "Buffer-stock savings and households' wealth response to income shocks," VfS Annual Conference 2016 (Augsburg): Demographic Change 145507, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc16:145507
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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