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Life-Cycle Model and Consumption:
Structural Estimation of Precautionary and Life-Cycle Motives



Naohito Abe and Tomoaki Yamada


August, 2004


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Abstract
This paper simulates a “buffer-stock” saving model of precautionary saving and estimates the parameters of the utility function by matching the simulated age-consumption profile with those observed in the micro-level data from the Family Income and Expenditure Survey (FIES) in Japan. Our empirical results show that with high degree of patience (small subjective discount rate) and low degree of risk aversion, about 40 % of saving by young consumers is due to the precautionary motives.
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Copyright (C) 2003 by Institute of Economic Research.All rights reserved.