The Importance of Precautionary Motives in Explaining Individual and Aggregate Saving

107 Pages Posted: 19 Jun 2000 Last revised: 27 Nov 2000

See all articles by R. Glenn Hubbard

R. Glenn Hubbard

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Jonathan S. Skinner

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Stephen P. Zeldes

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: November 1993

Abstract

This paper examines predictions of a life-cycle simulation model -- in which individuals face uncertainty regarding their length of life, earnings, and out-of-pocket medical expenditures, and imperfect insurance and lending markets -- for individual and aggregate wealth accumulation. Relative to life-cycle or buffer-stock alternatives, our augmented life-cycle model better matches a variety of features of U.S. data, including: (1) aggregate wealth, (2) cross-sectional differences in wealth-age and consumption-age profiles by education group, and (3) short-run time-series co-movements of consumption and income.

Suggested Citation

Hubbard, Robert Glenn and Skinner, Jonathan S. and Zeldes, Stephen P., The Importance of Precautionary Motives in Explaining Individual and Aggregate Saving (November 1993). NBER Working Paper No. w4516. Available at SSRN: https://ssrn.com/abstract=226756

Robert Glenn Hubbard (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

HOME PAGE: http://www.gsb.columbia.edu/faculty/ghubbard

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jonathan S. Skinner

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States
603-646-2535 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
603-646-2535 (Phone)

Stephen P. Zeldes

Columbia Business School - Finance and Economics ( email )

3022 Broadway
Uris 825, Dept. of Finance & Economics
New York, NY 10027
United States
212-854-2492 (Phone)
212-208-4699 (Fax)

HOME PAGE: http://www.columbia.edu/~spz1

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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