Precautionary Saving and Health Risk: Evidence from Italian Households Using a Time Series of Cross Sections

18 Pages Posted: 28 Nov 2005

See all articles by Vincenzo Atella

Vincenzo Atella

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS); Department of Economics and Finance; University of Rome Tor Vergata - Faculty of Economics

Furio C. Rosati

University of Rome Tor Vergata - Faculty of Economics

Maria Christina Rossi

University of Torino

Date Written: November 2005

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. 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. Our results show strong support for the precautionary saving hypothesis as a response to health uncertainty.

Keywords: Precautionary saving, Euler equation, Health risk, Italian

JEL Classification: D91, E21

Suggested Citation

Atella, Vincenzo and Rosati, Furio C. and Rossi, Maria Christina, Precautionary Saving and Health Risk: Evidence from Italian Households Using a Time Series of Cross Sections (November 2005). CEIS Working Paper No. 75, Available at SSRN: https://ssrn.com/abstract=856166 or http://dx.doi.org/10.2139/ssrn.856166

Vincenzo Atella (Contact Author)

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS) ( email )

Via Columbia, 2
Rome, I-00133
Italy
+39 06 72595648 (Phone)

Department of Economics and Finance ( email )

Via Columbia 2
Roma, 00133
Italy

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
I-00133 Rome, 00133
Italy
+39 06 72595635 (Phone)
+30 06 2020 500 (Fax)

HOME PAGE: http://www.economia.uniroma2.it/sefemeq/professori/atella/

Furio C. Rosati

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy
6 2020 500 (Fax)

Maria Christina Rossi

University of Torino ( email )

Torino
Italy

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