The Effect of Health and Employment Risks on Precautionary Savings

68 Pages Posted: 4 Nov 2011

See all articles by Johannes Geyer

Johannes Geyer

German Institute for Economic Research (DIW Berlin)

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2011

Abstract

This paper extends the idea of using ex-ante risk measures in a model of precautionary savings by explicitly simulating future net-income risks. The uncertainty measure takes into account the interdependency of labour market status and health. The model is estimated for prime age males using the German Socio-Economic Panel Study for years 2001-2007. The empirical analysis is conducted using a measure for saving stocks and saving flows. The latter model allows to control for individual specific effects. I find evidence for precautionary savings in response to the uncertainty measures. The results are robust and stable across specifications. There is evidence for a share of precautionary wealth of about 14 to 17 percent.

Keywords: Precautionary savings, health, employment, risks

JEL Classification: D91, E21

Suggested Citation

Geyer, Johannes, The Effect of Health and Employment Risks on Precautionary Savings (October 1, 2011). DIW Berlin Discussion Paper No. 1167, Available at SSRN: https://ssrn.com/abstract=1954615 or http://dx.doi.org/10.2139/ssrn.1954615

Johannes Geyer (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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