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Please use this identifier to cite or link to this item: http://hdl.handle.net/2108/176

Title: Precautionary saving and health risk evidence from the Italian households using a time series of cross sections
Authors: Atella, Vincenzo
Rosati, Furio C.
Rossi, Maria C.
Keywords: precautionary saving
Euler equation
health risk,
Italian economy
Issue Date: Jan-2002
Publisher: CEIS
Series/Report no.: Quaderni CEIS; 159
Abstract: In this paper we analyse the importance of precautionary saving in Italy. In contrast to previous studies, we focus on two contemporaneous sources of uncertainty, income and health expenditures, to explain the presence of precautionary saving. The major changes occurred in public health care policies from 1985 to 1996 have caused households to pay a larger share of their out-of-the-pocket medical expenditures. These events have caused households to face both a higher expected mean and a larger variance of health expenditures. Moreover, the economic recession occurred in the early ‘90s and the Maastricht requirements led to general worsening of future expectations of income. We therefore expect consumers to react to this uncertainty by generating precautionary saving. We test this prediction using an Euler equation augmented with the presence of the variance of income and health expenditure shocks. By using a time series of cross sections from the ISTAT household budget survey, we find...
URI: http://hdl.handle.net/2108/176
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