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Buffer-stock saving and households' response to income shocks

Author

Listed:
  • Giulio Fella

    (Queen Mary, University of London, CFM and IFS)

  • Serafín Frache

    (Banco Central del Uruguay, Departamento de Economia FCS-UDELAR)

  • Winfried Koeniger

    (University of St.Gallen (Swiss Institute for Empirical Economic Research), CESifo, Center for Financial Studies and IZA)

Abstract
We use the Italian Survey of Household Income and Wealth, a rather unique dataset with a long time dimension of panel information on consumption, income and wealth, to structurally estimate a buffer-stock saving model. We exploit the information contained in the joint dynamics of income, consumption and wealth to quantify the degree of insurance against income risk. The estimated model implies that Italian households can insure between 89 and 95 percent of a transitory and between 7 and 9 percent of a permanent income shock. Compared to existing empirical estimates for the same dataset, our findings suggest that Italian households do not have access to significant insurance beyond self-insurance

Suggested Citation

  • Giulio Fella & Serafín Frache & Winfried Koeniger, 2016. "Buffer-stock saving and households' response to income shocks," Documentos de trabajo 2016001, Banco Central del Uruguay.
    • Handle: RePEc:bku:doctra:2016001
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    File URL: https://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/1.2016.pdf
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    References listed on IDEAS

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    Cited by:

    1. Dirk Krueger & Egor Malkov & Fabrizio Perri, 2023. "How Do Households Respond to Income Shocks?," Staff Report 655, Federal Reserve Bank of Minneapolis.
    2. Christian Stoltenberg & Arne Uhlendorf, 2022. "Consumption Choices and Earnings Expectations: Empirical Evidence and Structural Estimation," Working Papers 2022-15, Center for Research in Economics and Statistics.
    3. Francesca Parodi, 2024. "Consumption Tax Cuts In A Recession," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 117-148, February.

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    More about this item

    Keywords

    Consumption; Wealth; Incomplete markets; Insurance;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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