Pericoli, Filippo Maria and Ventura, Luigi (2011): Family dissolution and precautionary savings: an empirical analysis. Forthcoming in: Review of Economics of the Household
Download (1212Kb) | Preview
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 two 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.
|Item Type:||MPRA Paper|
|Original Title:||Family dissolution and precautionary savings: an empirical analysis|
|Keywords:||Family disruption risk; Precautionary saving; Risk sharing|
|Subjects:||D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory
D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
|Depositing User:||Filippo Pericoli|
|Date Deposited:||02. Feb 2012 10:05|
|Last Modified:||12. Feb 2013 08:31|
Bajtelsmit, V.L. and Bernasek, A. (1996), “Why Do Women Invest Differently Than Men?”, Financial Counseling and Planning, 7, 1-10.
Becker, G.B. (1973). “A Theory of Marriage: Part I”, The Journal of Political Economy, 81, 813-846.
Becker, G.B. (1974). “A Theory of Marriage: Part II”, The Journal of Political Economy, 82, 11-26.
Benito, A. (2006). “Does Job Insecurity affect Household Consumption?”, Oxford Economic Papers, 58, 157-181.
Browning, M., Bourguignon, F., Chiappori, P.A., Lechene, V. (1994). “Income and Outcomes: a Structural Model of Intrahousehold Allocation”, Journal of Political Economy, 102(6), 1067-1096.
Chami, R., Hess, G. (2005). “For Better or For Worse? State-Level Marital Formation and Risk Sharing”, Review of Economics of the Household, 3(4), 367-385.
Chiappori, P.A. (1988a). “Rational Household Labor Supply”, Econometrica, 56, 63-89.
Chiappori, P.A. (1988b). “Collective Labor Supply and Welfare”, Journal of Political Economy, 100, 437-467.
De Lucia, C., Meacci, M. (2005). “Does Job Security Matter for Consumption? An Analysis on Italian Microdata”. Istituto di Studi e Analisi Economica, Working Paper, 54.
Devereux, M.B. and Smith, G.W. (1994). “International Risk Sharing and Economic Growth”, International Economic Review, 35, 3.
Eisenhauer, J. and L. Ventura, (2005), "The Relevance of Precautionary Saving", German Economic Review, 6, 2005.
Floro, M.S. and S. Seguino, (2002), “Gender Effects on Aggregate Saving”, Working Paper Series n. 23, World Bank.
Floro, M.S. and Seguino, S.(2003). “Does Gender Have Any Effect on Aggregate Saving? An Empirical Analysis”, International Review of Applied Economics, 17(2), 147-166.
Giraldo, A., Rettore, E., Trivellato, U. (2001). “Attrition Bias in the Bank of Ital’s Survey of Household Income and Wealth”, Proceedings of the International Conference on Quality in Official Statistics, Stockholm, May 14-15, 2001.
Gonzalez, L., Ozcan, B. (2008). “The Risk of Divorce and Household Saving Behavior”, IZA Discussion Papers, n° 3726.
Greene, W. H., (2003). “Econometric Analysis”, Prentice Hall, New Jersey.
Grossbard-Shechtman, S.A. (1984). “A Theory of Allocation of Time in Markets for Labor and Marriage”, Economic Journal, 94(4), 863-882.
Grossbard-Shechtman, S.A., Neuman, S. (1988). “Woman’s Labor Supply and Marital Choice”, Journal of Political Economy, 96(6), 1294-1302.
Jappelli, T., Pistaferri, L. (2010). “Does Consumption Inequality Track Income Inequality in Italy”, Review of Economic Dynamics, 13(1), 133-135.
Johnson, W.R., Skinner, J. (1986). “Labor Supply and Marital Separation”, American Economic Review, 76(3), 455-469.
Kennickell, A. and Lusardi, A. (2005). “Disentangling the importance of the precautionary saving motive”, Working paper, Dartmouth College.
Kotlikoff, L.J., Spivak, A. (1981). “The Family as an Incomplete Annuities Market”, Journal of Political Economy, 89, 372-391.
Leland, H.E. (1968). “Saving and Uncertainty: The Precautionary Demand for Saving”, The Quarterly Journal of Economics, 82, 465-473.
Lupton, J. P., Smith, J. P. (2003). “Marriage, Assets and Savings”, in Marriage and the Economy: Theory and Evidence from Advanced Industrial Societies, Shoshana A. Grossbard-Shechtman Ed. Cambridge: Cambridge University Press.
Maddala, G. S., (1983). “Limited-Dependent and Qualitative Variables in Econometrics”, Cambridge University Press, Cambridge.
McElroy, M.B., Horney, M.J. (1981). "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand", International Economic Review 22(2), 333-349.
Murphy, K. M., Topel, R. H. (1985). “Estimation and Inference in Two-Step Econometric Models”, Journal of Business and Economics Statistics, 3, 88-97.
Nordblom, K. (2004). “Cohabitation and Marriage in a Risky World”, Review of Economics of the Household, 2(3), 325-340.
Pierce, N. L., Finke, M.S. (2006). “Precautionary Savings Behavior of Maritally Stressed Couples”, Family and Consumer Science Research Journal, 34, 223-240.
Rivers, D., Vuong, Q.H. (1988). “Limited Information Estimators and Exogeneity Tests for Simultaneous Probit Models”, Journal of Econometrics, 39, 347-366.
Rosenzweig, M. R. (1988). “Risk, Implicit Contracts and the Family in Rural Areas of Low-Income Countries”, Economic Journal, 98, 1148-1170.
Rosenzweig, M. R.., Stark, O. (1989). “Consumption Smoothing, Migration, and Marriage: Evidence from Rural India”, Journal of Political Economy, 97, 905-926.
Rosenzweig M. R., Wolpin, K. I. (1985). “Specific Experience, Household Structure and Intergenerational Transfers: Farm Family Land and Labor Arrangements in Developing Countries”, Quarterly Journal of Economics, 100, 961-987.
Rosenzweig M. R., Wolpin, K. I. (1994). “Parental and Public Transfers to Young Women and their Children”, American Economic Review, 84, 1195-1212.
Voena, A. (2010), “Yours, Mine and Ours: do Divorce Laws Affect the Intertemporal Behaviour of Married Couples?”, Job Market Paper.
Wooldrige, J. M. (2002). “Econometric Analysis of Cross Section and Panel Data”, MIT Press, Cambridge.