Stephen Zeldes

The Importance of Precautionary Motives for Explaining Individual and Aggregate Saving

Coauthor(s): R. Glenn Hubbard, Jonathan Skinner.

Abstract:
This paper examines predictions of a life-cycle simulation model—in which individuals face uncertainty regarding their length of life, earnings, and out-of-pocket medical expenditures, and imperfect insurance and lending markets—for individual and aggregate wealth accumulation. Relative to life-cycle or buffer-stock alternatives, our augmented life-cycle model better matches a variety of features of U.S. data, including: (1) aggregate wealth, (2) cross-sectional differences in wealth-age and consumption-age profiles by education group, and (3) short-run time series comovements of consumption and income.

Source: Carnegie-Rochester Conference Series on Public Policy
Exact Citation:
Hubbard, R. Glenn, Jonathan Skinner, and Stephen Zeldes. "The Importance of Precautionary Motives for Explaining Individual and Aggregate Saving." Carnegie-Rochester Conference Series on Public Policy 40 (June 1994): 59-125.
Volume: 40
Pages: 59-125
Date: 6 1994