Precautionary saving and earnings uncertainty in Japan: A household-level analysis

This paper improves upon the methodology of Dardanoni (1991. Appl. Econ. 23, 153-160) and applies it to household-level data from a Japanese Government survey in order to analyze the impact and importance of precautionary saving arising from earnings uncertainty. The major results can be summarized as follows: (1) earnings uncertainty has a significant impact on household consumption and saving; (2) precautionary saving arising from earnings uncertainty comprises 5.557% of the total saving of salaried worker households and 64.3% of the total saving of agricultural, forestry, fisheries, and self-employed households; (3) the prediction of Carroll and Summers' buffer stock saving hypothesis that young households will be more likely to save for precautionary purposes than older households is confirmed; and (4) occupation, age, and educational attainment significantly affect the degree of household earnings uncertainty. (C) 2003 Elsevier Science (USA). All rights reserved.