Studies on precautionary savings (PS) have shown a variety of results which range from high shares of PS in total wealth to little or no PS at all. The plurality of results is probably caused by the many conceptual choices and problems that accompany this analysis. An important problem is to find a reliable measure of permanent income and future economic risks that corresponds to those perceived by the household at the time the savings decisions are made. In this paper we aim to model two ex-ante risk components, namely health and unemployment risk in a model of precautionary savings. Because employment and health risks are strongly interdependent, this extension can help to extend traditional risk measures. This is the first application using future unemployment as a measure of uncertainty for German data. A further contribution is to explicitly include health as a risk in a model of PS. As many studies before, we do not find any evidence for PS in response to the uncertainty measures of health and employment risks in Germany. This result holds for various specifications of the buffer-stock model and estimation samples.
Themen: Arbeit und Beschäftigung
JEL-Classification: D91;E21
Keywords: savings, health, disability
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