Saving and Habit Formation: Evidence from Dutch Panel Data

This paper focuses on the role of habit formation in individual preferences over consumption and saving.We closely relate to Alessie and Lusardi's (1997) model as we estimate a model which is based on their closed-form solution, where saving is expressed as a function of lagged saving and other regressors. Alternatively, we could use an Euler-equation approach (see e.g.Guariglia and Rossi (2001) and Dynan (2000)), but we will argue that this approach may yield spuriously negative estimates of the habit formation parameter because in surveys consumption is typically measured with considerable error.A second reason to use the closed form solution as a basis of the empirical model is that it embodies more information about the habit formation model than the Euler equation.Therefore, the closed form solution allows for a more powerful test of the validity of the habit formation model than the Euler equation approach.preferences;savings;incomes;habit formation

Premium Differentiation in the Unemployment Insurance System and the Demand for Labor

In this study we investigate the effect of the introduction of premium differentiation (experience rating) in the Dutch Unemployment Insurance system on the demand for labor. We formulate a model of labor demand, based on the model by Bentolila and Bertola (1990), in which we distinguish two types of workers: the "young" and the "old". This distinction is made, as one of the major motives for opening the discussion around premium differentiation in the Netherlands is the wish to reduce the inflow of older workers into unemployment. In the model, labor adjustment costs (hiring and firing costs) are linear. The model allows for uncertainty in the business cycle. Premium differentiation is incorporated in the model as a rise in firing costs, accompanied by a decrease in unemployment insurance premium payments. Values for the model parameters are determined to quantify the effect of premium differentiation on the demand for labor in various sectors of the Dutch economy. We compute the effect of premium differentiation on the steady state level of labor demand. We also compute the effect of premium differentiation on the level of profits.Unemployment Insurance;premium differentiation;labor demand

Consumption, savings and demography

Economics

The problem of not observing small expenditures in a consumer expenditure survey

Economics