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Firm-Related Risk and Precautionary Saving Response / Andreas Fagereng, Luigi Guiso, Luigi Pistaferri.
- Format:
- Book
- Author/Creator:
- Fagereng, Andreas.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w23182.
- NBER working paper series no. w23182
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- We propose a new approach to identify the strength of the precautionary motive and the extent of self-insurance in response to earnings risk based on Euler equation estimates. To address endogeneity problems, we use Norwegian administrative data and instrument consumption and earnings volatility with the variance of firm-specific shocks. The instrument is valid because firms pass some of their productivity shocks onto wages; moreover, for most workers firm shocks are hard to avoid. Our estimates suggest a coefficient of relative prudence of 2, in a very plausible range.
- Notes:
- Print version record
- February 2017.
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