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Author: Utendorf, Kelvin Robert
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Utendorf, Kelvin Robert |
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Precautionary Saving and Unemployment Insurance: Theoretical Insights and Their Empirical Relevance Ph.D. Dissertation, Michigan State University, 1993. DAI-A 54/10, p. 3824, Apr 1994 Cohort(s): Older Men Publisher: UMI - University Microfilms, Bell and Howell Information and Learning Keyword(s): Labor Economics; Life Cycle Research; Modeling; Savings; Unemployment Insurance This dissertation examines the behavior of precautionary saving in the presence of unemployment insurance. Given that others have found that precautionary saving could account for fifty percent of the aggregate life cycle capital accumulation in the United States, any factor which influences private precautionary saving has a potentially large effect on capital accumulation and future productivity growth. In chapter one, a precise link is developed between precautionary saving and unemployment insurance. A theoretical model is presented in which risk averse agents save as a precaution against the possibility of future unemployment. Two different types of unemployment insurance schemes are examined: a forced-saving plan with characteristics similar to those found in the U.S. unemployment insurance system; a pay-as-you-go plan possessing attributing similar to unemployment insurance systems found throughout much of the rest of the world. Precautionary saving is shown to be decreasing in the level of unemployment insurance benefits, and in fact is replaced by unemployment insurance benefits by more than one-to-one in the forced-saving model. Chapter two extends the theoretical model by giving agents the ability to borrow or lend. Previous work on precautionary saving assumes that loan markets are closed so that saving is the only means of intertemporal consumption smoothing. Opening credit markets provides agents with a second method of transferring resources across time periods. The addition of a forced-saving unemployment insurance plan is shown to harm non-covered workers by increasing the interest rate they must pay to borrow. Chapter three tests the relationship between unemployment insurance and precautionary saving using panel data from the National Longitudinal Surveys of men. Wealth-based measures of precautionary saving are regressed on an unemployment insurance generosity index and other determinants of precautionary saving. Precautionary saving is generally found to be positively related to the generosity of unemployment insurance, especially for union members, which may indicate that a greater than optimal portion of wages are replaced by unemployment insurance benefits. |
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Bibliography Citation
Utendorf, Kelvin Robert. Precautionary Saving and Unemployment Insurance: Theoretical Insights and Their Empirical Relevance. Ph.D. Dissertation, Michigan State University, 1993. DAI-A 54/10, p. 3824, Apr 1994. |