Intergenerational Precautionary Savings in Europe*

Abstract

In this paper, we study whether precautionary saving motives have an intergenerational component; namely whether and to what extent the income uncertainty of younger generations affects the savings of their parents. To this end, we exploit a cross-country European longitudinal household dataset collecting information on parents and their offspring, augmented with indicators for their offspring's income risk. We find that savings significantly respond to changes in income risk, also across generations. This finding is robust to several checks and displays heterogeneity across countries, which is consistent with substitutability between private and public insurance tools. JEL Classification numbers: D13, D14, C23. *The research is financed by the Blue Sky Research project, itself financed by the University of Pavia. Part of this work was developed when Trucchi was visiting ZEW's International Finance and Financial Management; its hospitality and financial support from DAAD are gratefully acknowledged. We thank Giuseppe Bertola, Markus