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Earnings Uncertainty, Precautionary Saving, and Moonlighting in Russia

Alessandra Guariglia and Byung-Yeon Kim
Journal of Population Economics
Vol. 17, No. 2 (Jun., 2004), pp. 289-310
Published by: Springer
Stable URL: http://www.jstor.org/stable/20007909
Page Count: 22
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Earnings Uncertainty, Precautionary Saving, and Moonlighting in Russia
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Abstract

Using a panel of 3,522 Russian households over the period 1994-2000, this paper tests the precautionary saving hypothesis, according to which households save to self-insure against uncertainty. We proxy uncertainty with a measure of earnings variability based on the subjective probability of primary job loss of household heads, and find that this variable generally has a strong positive effect on saving, supporting the precautionary saving hypothesis. This effect is however reversed for those households whose head holds more than one job, highlighting the role of moonlighting as a self-insurance mechanism that can be used in alternative to precautionary saving to smooth consumption in the presence of fluctuating earnings. Our findings are robust to different measures of uncertainty and estimation procedures.

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