Intergenerational Precautionary Saving in Europe

Abstract

This paper examines the interaction between altruism towards offspring and precautionary savings. It investigates whether increased uncertainty in children labor income fosters savings of parents. We first construct a two-periods and two-generations model, to underline which are the mechanisms behind the intergenerational precautionary motive for savings. Second, we exploit two micro datasets to test the main theoretical implications. Parents’ consumption turns out to respond to the offspring’s income risk. This result is robust to the presence of family fixed effects and to many alternative empirical specifications.