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Fagereng, Andreas - 2017

We propose a new approach to identify the strength of the precautionary motive and the extent of self-insurance in response to earnings risk based on Euler equation estimates. To address endogeneity problems, we use Norwegian administrative data and instrument consumption and earnings volatility...

Persistent link: https://www.econbiz.de/10012962717

Understanding the Rise in Corporate Cash : Precautionary Savings or Foreign Taxes

Faulkender, Michael - 2017

What has driven the dramatic rise in U.S. corporate cash? Using non-public data, we show that the run-up is not uniform across firms but is concentrated in the foreign subsidiaries of multinational firms. Standard precautionary motives explain only domestic cash holdings, not these burgeoning...

Persistent link: https://www.econbiz.de/10012948039

Nudging Retirement Savings : A Field Experiment on Supplemental Plans

Clark, Robert L. - 2017

Although supplemental saving plans can be an important part of an individual's financial security in retirement, contribution rates remain low, particularly among those with lower salaries and less education. We report findings from a field experiment that distributed an informational nudge...

Persistent link: https://www.econbiz.de/10012949441

Health Expenditures and Precautionary Savings

Kotlikoff, Laurence J. - 2021

expenditures could explain a large amount of aggregate savings. Adding uncertain health expenditures to the model's economy raises … long run savings by almost one third, assuming individuals self insure. Arrangements for insuring uncertain health … expenditures also have potentially quite sizable effects on savings. Introducing actuarially fair insurance to the economy with …

Persistent link: https://www.econbiz.de/10013221878

Risky Income, Life Cycle Consumption, and Precautionary Savings

Skinner, Jonathan - 2021

This paper argues that precautionary savings against uncertain income comprise a large fraction of aggregate savings. A … precautionary savings comprises up to 56 percent of aggregate life cycle savings. The derived expression for n-period optimal … comparisons of savings patterns among occupational groups using the Consumer Expenditure Survey contradict the predictions of the …

Persistent link: https://www.econbiz.de/10013227055

Precautionary Saving and Consumption Smoothing Across Time and Possibilities

Kimball, Miles S.; Weil, Philippe - 2021

This paper examines how aversion to risk and aversion to intertemporal substitution determine the strength of the precautionary saving motive in a two-period model with Selden/Kreps-Porteus preferences. For small risks, we derive a measure of the strength of the precautionary saving motive which...

Persistent link: https://www.econbiz.de/10013228024

Disentangling the Importance of the Precautionary Saving Mode

Kennickell, Arthur B.; Lusardi, Annamaria - 2021

We assess the importance of the precautionary saving motive by relying on a direct question about precautionary wealth from the 1995 and 1998 waves of the Survey of Consumer Finances. In this survey, a new question has been designed to elicit the amount of desired precautionary wealth. This...

Persistent link: https://www.econbiz.de/10013235640

Liquidity Constraints and Precautionary Saving

Carroll, Chris; Kimball, Miles S. - 2021

Economists working with numerical solutions to the optimal consumption/saving problem under uncertainty have long known that there are quantitatively important interactions between liquidity constraints and precautionary saving behavior. This paper provides the analytical basis for those...

Persistent link: https://www.econbiz.de/10013238937

How Important is Precautionary Saving?

Carroll, Chris; Samwick, Andrew - 2021

We estimate the fraction of the wealth of a sample of PSID respondents that is held because some households face greater income uncertainty than others. We first derive an equation characterizing the theoretical relationship between wealth and uncertainty in a buffer-stock model of saving. Next,...

Persistent link: https://www.econbiz.de/10013240630

Theoretical Foundations of Buffer Stock Saving

Carroll, Christopher D. - 2021

"Buffer-stock" versions of the dynamic stochastic optimizing model of saving are now standard in the consumption literature. This paper builds theoretical foundations for rigorous understanding of the main characteristics of buffer stock models, including the existence of a target level of...

Persistent link: https://www.econbiz.de/10013240659