Risk Management and Wealth Accumulation Behavior in France.

In a prevailing climate of increasing uncertainty (rising risk of unemployment, pension funding problems and unstable family structures), French households have adopted new saving behavior reflected during the nineties, primarily by considerable investment in life insurance products (representing more than 50 percent of financial saving). Recent theoretical saving models have placed greater emphasis on studying prudent behavior in the face of an uncertain future and have shown the influences of multiple risks and borrowing constraints on precautionary savings and portfolio choices. In this vein, a household exposed to a high future income risk or strong liquidity constraints may increase its savings, reduce its investments in risky assets and increase its share of liquid investments. In this paper, wealth accumulation and their relation to these new factors will be specifically studied. Empirical tests on recent French data ("Patrimoine 97") show the relevance of subject ive earnings variance to explain wealth accumulation but its contribution is not very large.