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The Effect of Health and Employment Risks on Precautionary Savings

SOEPpapers 408, 66 S.

Johannes Geyer


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This paper extends the idea of using ex-ante risk measures in a model of precautionary savings by explicitly simulating future net-income risks. The uncertainty measure takes into account the interdependency of labour market status and health. The model is estimated for prime age males using the German Socio-Economic Panel Study for years 2001-2007. The empirical analysis is conducted using a measure for saving stocks and saving flows. The latter model allows to control for individual specific effects. I find evidence for precautionary savings in response to the uncertainty measures. The results are robust and stable across specifications. There is evidence for a share of precautionary wealth of about 14 to 17 percent.

Johannes Geyer

Deputy Head in the Public Economics Department

JEL-Classification: D91;E21
Keywords: Precautionary savings, health, employment, risks
Frei zugängliche Version: (econstor)