Family dissolution and precautionary savings: an empirical analysis

The main research question of this paper is whether or not the risk of family disruption has an impact on the consumption/saving decisions of households. Although little empirical work exists in this area, often presenting indirect evidence, the theory is divided over the effect of family risk over saving and wealth accumulation. By using data from the Italian Survey on Households Income and Wealth, we build a probabilistic model to assess the probability of marital splitting, and then we insert this probability as a distinct or interacted regressor, in a statistically consistent way, into a linear model of consumption. Furthermore, we study the differential behaviour, in terms of consumption/saving choices, of couples experiencing marital splitting over the subsequent two years. The main result of our analysis is that family disruption risk generates precautionary savings, reducing current consumption. In fact, according to our estimates, on average, the risk of divorce generates an amount of additional yearly precautionary savings of around 800 euros at constant prices of the year 2000, which represents 11% of overall household savings.Family disruption risk; Precautionary saving; Risk sharing

Till Labor Cost Do Us Part. On the Long Run Convergence of EMU Countries

A sustainable long-run pattern in the relative competitiveness of euro area countries is a key factor for the survivorship of the monetary union. We analyze the issue focussing on unit labor cost dynamics using cointegration analysis for the whole economy and for the manufacturing sector separately. Our findings show that the introduction of the euro has increased, rather than decreased, the distance among member countries, as measured in the metric of unit labor costs. Dispersion of productivity rather than wage compensation suggests that persisting idiosyncratic dynamics are driven by real factors, i.e. diverging technological patterns rather than by monetary factors, expressed by wage compensation

Family dissolution and precautionary savings: an empirical analysis

The main research question of this paper is whether or not the risk of family disruption has an impact on the consumption/saving decisions of households. Although little empirical work exists in this area, often presenting indirect evidence, the theory is divided over the effect of family risk over saving and wealth accumulation. By using data from the Italian Survey on Households Income and Wealth, we build a probabilistic model to assess the probability of marital splitting, and then we insert this probability as a distinct or interacted regressor, in a statistically consistent way, into a linear model of consumption. Furthermore, we study the differential behaviour, in terms of consumption/saving choices, of couples experiencing marital splitting over the subsequent two years. The main result of our analysis is that family disruption risk generates precautionary savings, reducing current consumption. In fact, according to our estimates, on average, the risk of divorce generates an amount of additional yearly precautionary savings of around 800 euros at constant prices of the year 2000, which represents 11% of overall household savings

Family dissolution and precautionary savings: an empirical analysis

The main research question of this paper is whether or not the risk of family disruption has an impact on the consumption/saving decisions of households. Although little empirical work exists in this area, often presenting indirect evidence, the theory is divided over the effect of family risk over saving and wealth accumulation. By using data from the Italian Survey on Households Income and Wealth, we build a probabilistic model to assess the probability of marital splitting, and then we insert this probability as a distinct or interacted regressor, in a statistically consistent way, into a linear model of consumption. Furthermore, we study the differential behaviour, in terms of consumption/saving choices, of couples experiencing marital splitting over the subsequent two years. The main result of our analysis is that family disruption risk generates precautionary savings, reducing current consumption. In fact, according to our estimates, on average, the risk of divorce generates an amount of additional yearly precautionary savings of around 800 euros at constant prices of the year 2000, which represents 11% of overall household savings

Risk-sharing among European Countries

This technical report details the results of risk sharing in the EU country by country. The great recession and the subsequent sovereign debt crisis in Europe have shown an asymmetric behavior of the different member countries of the EU, also with regards of risk sharing. We provide country specific measures decomposing risk sharing as that obtained via the capital markets, international transfers and savings or the credit markets channel. Afterwords, we use a mean group estimator to measure average risk sharing for the group of countries. This can help to identify where risk sharing is working and through which channels.JRC.B.1-Finance and Econom

JRC.B1 contribution to the SWD on the Movement of Capital and the Freedom of Payments

In the context of the institutional support to DG FISMA, JRC.B1 contributed to the 2018 Commission Staff Working Document on the Movement of Capital and the Freedom of Payments. JRC.B1 contribution included: (i) the analysis of home bias (tendency to invest in domestic financial assets); (ii) the analysis of diversification of cross-border investments and (iii) the estimation of the country specific degree of risk sharing for EU28 (risk sharing is the possibility to use cross-border capital markets to smooth domestic shock). JRC.B1 contribution appears in sections 2.5 and 2.6, and in Appendix III and IV.JRC.B.1-Finance and Econom

New Risk Sharing Channels in OECD Countries: a Heterogeneous Panel VAR

We aim to improve upon the existing empirical literature on international risk sharing under three dimensions. First, we generalize dynamic multi-equation approaches to the estimation of risk sharing channels, by adopting a Heterogeneous Panel VAR model. Within this framework, the coefficients representing the extent of risk sharing achieved through the different mechanisms are allowed to vary across countries. Second, we introduce two new risk sharing channels – namely, government consumption and the real exchange rate (that we further decompose into relative prices and the nominal exchange rate) – which allow us to investigate the role of fiscal policy and international price adjustments in the absorption of macroeconomic shocks. Third, we establish a better link between the “channels” empirical model and a theoretical formulation of the risk sharing condition which allows for PPP violations. Our empirical analysis, for a set of 21 OECD countries over 1960-2016, contributes to identifying the geographical structure and dynamics of risk sharing channels and to describing their evolution in the latest half-century. For the OECD sample as a whole, we confirm through 2016 the strong smoothing role played by credit markets and the small degree of risk sharing achieved through factor incomes. Interestingly, government consumption tends to have a dis-smoothing effect, due to its counter-cyclical movements. Another noteworthy result is the negative risk sharing effect of the real exchange rate, driven by the dis-smoothing role played by the movements of the nominal exchange rate, only partially offset by relative price adjustments. The evolution of these risk sharing mechanisms is diverse, but the most important channels – namely credit markets and real exchange rate adjustments – exhibit slightly positive trends for the first half of the period, negative trends afterwards, and a recovery in more recent years. Our results demonstrate that the extent of risk sharing is strikingly different across countries, especially if we take into account valuation effects through the real exchange rate. Even considering only traditional risk sharing channels, the country-specific magnitude of risk sharing on impact ranges from around 15% to over 80%. In addition, dynamics are also quite diverse across countries; for example, risk sharing through credit markets, while quite effective on impact, provokes dis-smoothing for about two thirds of the countries from the second year onwards. Our approach is of particular interest for policy makers, as it allows identifying the strengths and the weaknesses of the institutional and behavioral risk sharing mechanisms at work in different countries.JRC.B.1-Finance and Econom

Comparing post-crisis dynamics across Euro Area countries with the Global Multi-country model

Abstract Following the global financial crisis, the Euro Area (EA) has experienced a persistent slump and notable trade balance adjustments, but with pronounced differences across EA Member States. We estimate a multi-country structural macroeconomic model to assess and compare the main drivers of GDP growth and trade balance adjustment across Germany, France, Italy, and Spain. We find that the pronounced post-crisis slump in Italy and Spain was mainly driven by positive saving shocks ('deleveraging') and by an increase in investment and intra-euro risk premia. Fiscal austerity in Spain and the productivity slowdown in Italy have been additional sizable contributors to the economic downturn. The results further suggest that euro depreciation, heightened intra-euro risk premia and subdued investment had a sizable impact on the trade balance reversals in Italy and Spain, which has been offset in France by a strong increase in imports and lower exports

Prevalence of chronic HCV infection in EU/EEA countries in 2019 using multiparameter evidence synthesis

Publisher Copyright: © 2023 The Author(s)Background: Epidemiological data are crucial to monitoring progress towards the 2030 Hepatitis C Virus (HCV) elimination targets. Our aim was to estimate the prevalence of chronic HCV infection (cHCV) in the European Union (EU)/European Economic Area (EEA) countries in 2019. Methods: Multi-parameter evidence synthesis (MPES) was used to produce national estimates of cHCV defined as: π = πrecρrec + πexρex + πnonρnon; πrec, πex, and πnon represent cHCV prevalence among recent people who inject drugs (PWID), ex-PWID, and non-PWID, respectively, while ρrec, ρex, and ρnon represent the proportions of these groups in the population. Information sources included the European Centre for Disease Prevention and Control (ECDC) national operational contact points (NCPs) and prevalence database, the European Monitoring Centre for Drugs and Drug Addiction databases, and the published literature. Findings: The cHCV prevalence in 29 of 30 EU/EEA countries in 2019 was 0.50% [95% Credible Interval (CrI): 0.46%, 0.55%]. The highest cHCV prevalence was observed in the eastern EU/EEA (0.88%; 95% CrI: 0.81%, 0.94%). At least 35.76% (95% CrI: 33.07%, 38.60%) of the overall cHCV prevalence in EU/EEA countries was associated with injecting drugs. Interpretation: Using MPES and collaborating with ECDC NCPs, we estimated the prevalence of cHCV in the EU/EEA to be low. Some areas experience higher cHCV prevalence while a third of prevalent cHCV infections was attributed to PWID. Further efforts are needed to scale up prevention measures and the diagnosis and treatment of infected individuals, especially in the east of the EU/EEA and among PWID. Funding: ECDC.Peer reviewe

The impact of Social Capital on Consumption Insurance and Income Volatility in the U.K.: Evidence from the British Household Panel Survey

On British Household Panel Survey data we measure various indices of social capital at the individual and household level, and use them as explanatory variables in standard consumption insurance tests. We find that two out of three aspects of social capital positively impact on consumption smoothing, by reducing the sensitivity of idiosyncratic consumption to idiosyncratic income, both in the long and in the short run. Such effects, however, turn out to be more pronounced in the long run. Further confirmation of the positive impact of social capital on insurance opportunities are derived from an income smoothing exercise, as well as from a Poisson and a Logit analysis on the occurrence of unemployment spells