Saving from Permanent and Transitory Income. The Case of Polish Households
The paper analyses the impact of income uncertainty on household saving. Using a panel of Polish households for 1997-2000 we decompose uncertainty of household income into a variance of shocks to permanent income and a variance of shocks to transitory income. Then we regress households' savings onthe estimated measures of income uncertainty controlling for demographicand social variables. Our empirical results indicate that the average variances of permanent and transitory income of Polish households do not differ much. Both measures of income uncertainty are statistically significant in predicting saving. The permanent income uncertainty affects savings more than the uncertainty of transitory income. A significant part of households' saving in Poland may be of precautionary, buffer-stock character.(original abstract)
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