Precautionary Saving and the Accumulation of Wealth

TitlePrecautionary Saving and the Accumulation of Wealth
Publication TypeReport
Year of Publication2000
AuthorsLusardi, A
InstitutionDartmouth College
Call Numberwp_2000/Lusardi_precautionary.pdf
KeywordsConsumption and Savings, Expectations, Net Worth and Assets
Abstract

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.

Notes

RDA 1998-002

URLhttp://www.dartmouth.edu/ alusardi/precautionary.pdf
Endnote Keywords

Saving/Wealth/Subjective expectations

Endnote ID

6605

Citation Key5418