The Nature of Precautionary Wealth / Christopher D. Carroll, Andrew A. Samwick.

Format:

Book

Author/Creator:

Carroll, Christopher D.

Contributor:

National Bureau of Economic Research.

Samwick, Andrew A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5193.

NBER working paper series no. w5193

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Summary:

This paper uses the Panel Study of Income Dynamics to provide some of the first direct evidence that wealth is systematically higher for consumers with greater income uncertainty. However, the apparent pattern of precautionary saving is not consistent with a standard parameterization of the life cycle model in which consumers are patient enough to begin saving for retirement early in life: wealth is estimated to be less sensitive to uncertainty in permanent income than implied by that model. Instead, our results suggest that over most of their working lifetime, consumers behave in accordance with the 'buffer-stock' models of saving described in Carroll (1992) or Deaton (1991), in which consumers hold wealth principally to insulate consumption against near term fluctuations in income.

Notes:

Print version record

July 1995.