Saving and Permanent Income: Evidence from the 1992 SCF

Abstract:     
This paper looks at household saving primarily using a three-level indicator originally developed for the 1992 Survey of Consumer Finances. The paper examines this saving variable in light of other indicators of saving behavior observed in the survey, and uses the variable to model saving behavior. This model contains, among other variables, an indicator of typical saving practices as a control for individual heterogeneity. The model provides interesting results on the role of transitory income, age, expectations, and other factors on saving. These results suggest that indicator variables may provide sufficient information for modeling without severely burdening survey respondents.

JEL Classification: E21, D12, C42

working papers series