Empirical Analysis of Household Savings Decisions in Context of Uncertainty: A cross-sectional approach

Most empirical studies of savings behaviour that take explicit account of uncertainty consider for identiÂ…cation data that describe the evolution of circumstances observed during an appreciable period of the life-course. Here we report results obtained using a dynamic programming model that has been adapted to permit identiÂ…cation of preference parameters based on data observed at a point in time for a given population cross-section. The behavioural margins used to identify key preference parameters are described, and the advantages of the approach are discussed. Our empirical results demonstrate the feasibility of the empirical approach in context of contemporary desktop computing technology.