Income Uncertainty, Precautionary Saving, and Social Insurance

36 Pages Posted: 29 Aug 2022

See all articles by Matthew Joyce

Matthew Joyce

The University of Sydney

Aarti Singh

The University of Sydney - School of Economics

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Abstract

Our estimates indicate that 24% of net wealth is attributed to precautionary savings in Australia. Moreover, across the income distribution, we find that low-income households have the highest fraction of their wealth accumulation explained by precautionary motives. These results for Australia are at odds with the estimates of precautionary wealth in the United States where related studies find that low-income households hold low levels of precautionary savings. Using a simple theoretical model, we show that differences in means-tested social insurance programs can rationalize these large differences in our empirical results.

Keywords: Precautionary savings, Income uncertainty, heterogeneity

Suggested Citation

Joyce, Matthew and Singh, Aarti, Income Uncertainty, Precautionary Saving, and Social Insurance. Available at SSRN: https://ssrn.com/abstract=4203047 or http://dx.doi.org/10.2139/ssrn.4203047

Matthew Joyce

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Aarti Singh (Contact Author)

The University of Sydney - School of Economics ( email )

Rm 370 Merewether (H04)
The University of Sydney
Sydney, NSW 2006 2008
Australia

HOME PAGE: http://sydney.edu.au/arts/economics/staff/academic/aarti_singh.shtml

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