The impact of labour income risk on household saving decisions in Turkey

This paper analyses the Household Budget Surveys prepared by the Turkish Statistical Institute to reveal the empirical importance of precautionary saving in Turkey. The most difficult aspect of the empirical analysis is the approximation of labour income risk as a proxy variable for future labour income uncertainty. Individual disposable income is interacted alternately with the probability of being unemployed and with the probability of job loss in the next period to generate the labour income risk variables. The econometric results support the precautionary saving hypothesis and labour income risk emerges as one of the main determinants of household saving decisions. Moreover, households implement alternative strategies to smooth out their income streams such as holding a second job and increasing the number of income earners in the family. However, it is evident that they are still vulnerable against labour income risk, which underlines the need for an effective and efficient social security system.     

Precautionary saving in Spain during the great recession: evidence from a panel of uncertainty indicators

The aim of this paper is to empirically study the effect of uncertainty on private consumption using a sample of Spanish households, and therefore, to test the existence of a precautionary motive for saving. Using data provided by the Spanish Survey of Household Finances and the Labour Force Survey we construct several uncertainty measures that are commonly used in the literature and an additional indicator based on job insecurity data, and we consequently estimate different econometric models under the life-cycle/permanent income hypothesis, including these measures of uncertainty. Our results are twofold: first, we find evidence in favour of the precautionary saving hypothesis. Secondly, we find that, unlike other variables related to the performance of the labour market (such as the unemployment rate) the job insecurity indicator is an appropriate variable to approximate income uncertainty in any macroeconomic context.     

Family dissolution and precautionary savings: an empirical analysis

The main research question of this paper is whether or not the risk of family disruption has an impact on the consumption/saving decisions of households. Although little empirical work exists in this area, often presenting indirect evidence, the theory is divided over the effect of family risk over saving and wealth accumulation. By using data from the Italian Survey on Households Income and Wealth, we build a probabilistic model to assess the probability of marital splitting, and then we insert this probability as a distinct or interacted regressor, in a statistically consistent way, into a linear model of consumption. Furthermore, we study the differential behaviour, in terms of consumption/saving choices, of couples experiencing marital splitting over the subsequent 2?years. The main result of our analysis is that family disruption risk generates precautionary savings, reducing current consumption. In fact, according to our estimates, on average, the risk of divorce generates an amount of additional yearly precautionary savings of around 800 euros at constant prices of the year 2000, which represents 11% of overall household savings.     

Cohabitation and Marriage in a Risky World

Different couples are analyzed in presence of income uncertainty and precautionary saving. Married couples have legal restrictions on their relationship that force them to act cooperatively, while cohabitants with limited commitment act non-cooperatively. This makes risk sharing different for different couples; married couples share risk completely, while cohabitants share risk to a lesser extent due to their lack of commitment and cooperation. This makes precautionary savings greater for cohabitants than for married couples. However, cohabitants also tend to undersave to possibly increase assistance from their partner. However, mutual altruism mitigates the inefficiencies and enforces time consistent risk sharing among cohabitants.I am thankful to Jonas Agell, Sophia Grahn-Voorneveld, Peter Kooreman and to Mats Persson for valuable comments on an earlier version. I have also received useful comments from the editor and from two anonymous referees. Generous financial support from the Jan Wallander and Tom Hedelius Foundation and from Knut and Alice Wallenbergs Foundation is gratefully acknowledged.     

Precaution and liquidity in the demand for housing

We exploit cross-sectional mortgage data to investigate the importance of liquidity constraints and a precautionary motive in the demand for housing. Households that are not liquidity constrained consume housing services essentially as the life cycle hypothesis suggests but with a significant precautionary component. Households that are liquidity constrained, in terms of not meeting standard loan-to-value or payments-to-income constraints, are similar to unconstrained households in most respects, including the precautionary motive, but they respond somewhat less to fluctuations in their lifetime income - suggesting some influence of bank-induced liquidity constraints. We additionally find, however, that banks enforce liquidity constraints only weakly.     

What motivates single women to save? the case of Japan

Using Japanese panel data, we analyze precautionary savings due to staying single in the presence of income uncertainty. Our panel analysis finds that compared with young women who are likely to get married within 3 years, those who are not plan to have 44 percent more savings for precautionary purposes, and 108 percent more for retirement. These results suggest that in facing higher risk of income fluctuation due to choosing to marry late or remain unmarried, young women intend to have more wealth to mitigate the income risk inherent in single life.     

Households’ precautionary behaviors—the effects of the introduction of National Health Insurance in Taiwan

By reducing risk of large out-of-pocket medical expenses, comprehensive social health insurance may reduce households’ motivation to engage in precautionary behaviors such as saving, procurement of private insurance, and spousal labor-force participation. We use the natural experiment provided by the 1995 introduction of National Health Insurance in Taiwan to examine these effects, using pre-existing differences in access to health insurance (tied to the household head’s and spouse’s joint employment status) to identify the effects of increasing insurance coverage. We find that comprehensive health insurance has a statistically significant and large effect on household savings, but no significant effects on purchase of private accident insurance and spousal employment.

Perceived risk and the precautionary demand for money

Keynes contended that individuals hold money for fear of being unable to meet unforeseen future cash requirements. This ‘precautionary demand’ for money has long been an accepted part of monetary theory, but has played a subservient role because of our inability to measure an individual's degree of aversion to risk. This study, however, employs a risk taking scale, similar to that developed by Zuckerman, to empirically investigate Keynes's precautionary demand for money. The results are sufficiently encouraging to suggest that this scale might successfully be applied to other economics subfields in which risk plays a role.     

Agricultural Biotechnology and the Precautionary Principle

The precautionary principle (PP) has come to the fore in agricultural biotechnology debate. It calls for early measures to avoid and mitigate uncertain environmental damage and health hazards in the future. This summary article reviews the discussion on the PP. Main arguments for and against invoking the principle in the context of genetically engineered crops are considered.     

Measuring precautionary wealth using cross-sectional data: the case of farm households

This study models and investigates the presence of precautionary wealth among farm households, something few studies have attempted. Using pooled farm-level data, we find that self-employed farm households accumulate more wealth. Precautionary savings is about 8% of total household wealth. In addition, we find that age, education, occupation, and operation size are important factors influencing wealth accumulation by US farm households.     

ECONOMICS COURSEWORK AND LONG‐TERM BEHAVIOR AND EXPERIENCES OF COLLEGE GRADUATES IN LABOR MARKETS AND PERSONAL FINANCE

Using survey data from over 2,000 students who attended one of four large public universities in 1976, 1986, or 1996, we investigate the relationship between taking more coursework in economics, or choosing economics as an undergraduate major, and a wide range of later decisions and outcomes in labor markets and personal finance, many of which have not been analyzed in earlier research. Generally, economics coursework and majoring in economics are significantly related to higher levels of earnings, home equity, and savings. They are also associated with working more hours and negatively related to completing graduate degrees (except the MBA). Among graduates with positive savings, those with more economics coursework invest more in individual stocks and money market accounts, and are more likely to have employer‐provided life insurance. They have fewer credit cards, which are more often paid in full each month. Most of these findings also hold for graduates who majored in business, but on average economics majors worked more hours and earned more than business majors, were more likely to have been self‐employed, and expected to retire at an older age. Business majors were more likely to have experienced a layoff, and were even less likely than economics majors to complete graduate degrees (except the MBA). Economics majors expected to save even more than business majors by retirement, and viewed short‐term and precautionary motives for saving as more important. Finally, our results suggest that exposure to economics through course‐taking is more important for later outcomes than actual performance in those courses. (JEL A22, J3, D12)     

Institutional determinants of saving: implications for low-income households and public policy

There is an emerging policy and academic discussion, supported by a growing body of empirical evidence, regarding the potentially positive effects of asset accumulation in low-income households. However, at least two questions precede this discussion: Can the poor save? And, if so, how can programs and policies promote saving by the poor? This paper begins to address these questions by examining the effects of institutional variables on saving behavior. We posit that four institutional variables—institutionalized saving mechanisms, targeted financial education, attractive saving incentives, and facilitation—promote saving. However, low-income households are substantially less likely to have access to these institutions, a phenomenon that may help explain their below-average saving rates. This discussion has implications, especially as policy-makers consider various proposals to increase the saving rates of low- and middle-income Americans.     

THE VARIABLE RATE-OF-GROWTH EFFECT IN THE LIFE-CYCLE SAVING MODEL

The rate of growth in real GNP g affects the aggregate saving rate positively in life-cycle saving models. This rate of growth effect is invariably estimated as the coefficient of g in the saving function. We show that other determinants of the saving rate influence the rate of growth effect. In other words, the rate of growth effect is not constant. Specifically, the real rate of return on financial assets and the population dependency ratio determine the timing of saving over the life cycle and, hence, alter the rate of growth effect. The dependency ratio also has an effect on the saving rate which is independent of g because it, together with the foreign saving rate, determines the level of saving over the life cycle.     

The Conundrum of Low Saving Rates in Latin America

Despite extensive economic reforms during the late 1980s/early 1990s, Latin America's saving rates remain low. This article examines the saving behaviour of 18 Latin American countries in the 1976‐2000 period and compares it with that of 25 other developing countries. It finds that lower inflation, income growth and increased real interest rates on deposits have not had the expected effects on saving rates in Latin America. Instead, the determinants of saving behaviour appear to differ between the two groups of countries, and saving rates are affected by a degree of inertia. Although more research is needed, this indicates that the focus of the neoliberal economic reforms of the 1980s was misplaced.     

Loss Aversion and Saving Behavior: Evidence from the 2007 U.S. Survey of Consumer Finances

This study uses data from the 2007 Survey of Consumer Finances to examine household saving behavior based on the two-period model of consumption/saving presented by Bowman et al. (Econ Behav Organ 38:155–178, 1999). The main focus of the model is the existence of an asymmetry in saving behavior in response to positive and negative adjustments in income. The results of the logistic regression analysis support the existence of loss aversion at the household level, where having income below the household’s reference level significantly decreases the likelihood of saving, but having income above the household’s reference level does not have a significant effect on the likelihood of saving.     

WHERE DID ALL THE SAVING GO? A LOOK AT THE RECENT DECLINE IN THE PERSONAL SAVING RATE

The inadequacy of aggregate saving is often cited as an explanation of the low levels of capital accumulation and productivity growth in the United States. Aggregate saving is low in large part because of the steep decline in the personal saving rate that has occurred since 1975. This paper uses a modified life-cycle model to analyze the determinants of this recent decline in the personal saving rate. The empirical results do not support the hypothesis that the decline in the saving rate was the result of a reduction in the real rate of return. The reduction in the rate of growth of income and the changing demographic profile of the labor force are the most important factors in accounting for the fall in the personal saving rate.     

Household Saving Behavior and the Influence of Family-Owned Business

This study focused on the lifecycle income objective of business-owning (farm and nonfarm) households. We hypothesized that the complex relationship between household and business management decisions had the potential to challenge predictions from standard household savings theory. Specifically, we tested for differences in saving behavior of these entrepreneurial households relative to the average US household. A limited dependent variable model was performed, keying in on the saving behavior and ability of household respondents in the Survey of Consumer Finances for 2007. The estimation results indicated that, along with standard demographic influences of savings models, households owning a farm or nonfarm business had a significantly higher likelihood of maintaining private saving in a given year. Our results highlight the necessity for future research on household saving behavior to account for the differing objectives and choice sets faced by households that own businesses when conducting analyses of household saving.     

Psychological, social and economic determinants of saving: comparing recurrent and total savings

Saving is of interest to psychologists and economists because of its importance to both the individual and the economy. Economic theories have traditionally acknowledged psychological factors in saving such as self-control, fear of economic uncertainty and pessimism about the economy. Katona (1975) has been particularly influential in suggesting that people's beliefs about the economy mediate their saving. However, subsequent attempts to predict savings using economic and psychological variables have met with limited success. The present study used a wide range of economic, demographic and psychological variables to distinguish between savers and non-savers and to predict recurrent saving and total savings. Two hundred and seventy-nine people completed in-depth surveys of their economic conditions, their social background and a variety of psychological predictors. Discriminant function analysis was used to discriminate between savers and non-savers. A variety of psychological factors discriminated those who save regularly from those who do not. Using multiple regression analysis, both recurrent and total saving were predicted by economic variables, recurrent saving was predicted also by psychological variables and total savings by demographic variables. Implications for the role of psychological factors in saving are discussed.     

Is There Evidence of Loss Aversion in Saving Behaviors in Spain?

This study uses data from the 2005 Survey of Household Finances to investigate the existence of loss aversion in household saving behavior in Spain. Loss aversion refers to an asymmetry in saving behavior in response to increases and decreases in income, where income decreases have a greater effect than increases. Evidence of loss aversion in household saving behaviors in the U.S. has been presented in previous research, and evidence of loss aversion in saving has been found using aggregate data from Europe, but to date there are no household level studies on loss aversion and saving behaviors in Europe. The present results do not support the existence of loss aversion at the household level in Spain. The results indicate symmetry in the responses to positive and negative income changes, failing to provide support for loss aversion in household saving behaviors.     

“Cultivating Children as You Would Valuable Plants:” The Gardening Governmentality of Child Saving,Toronto, Canada, 1880s–1920s1

Abstract Gardening metaphors with English middle-class overtones were widely used in the late nineteenth-century child saving writings in Toronto, Canada to explain and promote the ideal mode of parenting and the objective of child saving. An analysis of gardening metaphors contributes to understanding mechanisms of bio-power on the site of child saving. This paper argues that the child saving movement attempted to install a mode of proper parental control that can be described as “the gardening governmentality”– it was primarily positive/productive (yet without excluding repressive elements), individualized, intelligent, and localized.