Review of Economic Studies Vol. 88 No. 6 2021
Dynastic Precautionary Savings
Abstract
This article documents that parents accumulate savings to insure their children against income risk. I refer to this behaviour as dynastic precautionary saving. Using a sample of matched parent–child pairs from the Panel Study of Income Dynamics, I test for dynastic precautionary savings by examining the response of parental consumption to the child’s permanent income uncertainty. I exploit variation in permanent income risk across age and industry–occupation groups to confirm that, all else equal, higher uncertainty in the child’s permanent income depresses parental consumption, indicating a precautionary saving motive across generations.
- DOI
- 10.1093/restud/rdab012
- Volume
- 88
- Issue
- 6
- Pages
- 2735-2765
- Language
- en
- Sources
- bibtex:phds-export.bib openalex openalex crossref