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BUFFER‐STOCK SAVING AND HOUSEHOLDS' RESPONSE TO INCOME SHOCKS
Author(s) -
Fella Giulio,
Frache Serafin,
Koeniger Winfried
Publication year - 2020
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12459
Subject(s) - consumption smoothing , economics , permanent income hypothesis , marginal propensity to consume , stock (firearms) , econometrics , exploit , smoothing , consumption (sociology) , survey data collection , household income , buffer stock scheme , monetary economics , microeconomics , macroeconomics , statistics , computer science , mathematics , business cycle , geography , social science , computer security , archaeology , sociology , market liquidity
Abstract We exploit information on the joint dynamics of household labor income, consumption, and wealth in the Italian Survey of Household Income and Wealth to structurally estimate a buffer‐stock saving model. We compare the degree of consumption smoothing implied by the model to the corresponding empirical estimates based on the same data set. We estimate that Italian households smooth 12% of permanent income shocks in the data that is comparable to the model counterpart of 11% . This result contrasts with existing evidence, and our own findings in this article, of substantially more consumption smoothing in U.S. data.