research product . 2009

The Importance of Precautionary Saving Motive Among Indonesian Households

Abdul Jalil, Ahmad Zafarullah;
Open Access English
  • Published: 01 May 2009
In the developing world, the population is frequently faced with numerous natural, economic, institutional and market risks. Because of these uncertainties, many individuals and households experience difficult periods of unexpected reduction in income. Using panel data from the Indonesian Family Life Survey (IFLS), this paper tests the existence of precautionary saving associated with income risk in Indonesia. The results of the estimation show that the uncertainty variable is not significantly related to the growth of consumption which signifies that Indonesian households do not constitute precautionary saving to smooth their consumption. The finding may be exp...
free text keywords: Indonesia, consumption smoothing, precautionary savings, income risks, uncertainty, D13 - Household Production and Intrahousehold Allocation, D81 - Criteria for Decision-Making under Risk and Uncertainty, D91 - Intertemporal Household Choice ; Life Cycle Models and Saving
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