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Fuchs-Schundeln, Nicola. 2008. "The Response of Household Saving to the Large Shock of German Reunification."
,
98(5): 1798-1828.
Show Article Details
DOI: 10.1257/aer.98.5.1798
Abstract:German reunification was a large, unexpected shock for East Germans.
Exploiting German reunification as a natural experiment, I analyze the validity
of the life-cycle consumption model. I derive three stylized features concerning
the saving behavior of East versus West Germans after reunification: (i)
East Germans have higher saving rates than West Germans; (ii) this East-West
gap is increasing in age at reunification; and (iii) for every cohort, this gap is
declining over time. I show that a comprehensive life-cycle model can replicate
these features. The precautionary saving motive is essential for the success of
the model. (JEL D14, D91, E21)
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Authors:
Fuchs-Schundeln, Nicola (Harvard U)
JEL Classifications:
D14: Personal Finance
D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
E21: Macroeconomics: Consumption; Saving; Wealth
R23: Urban, Rural, and Regional Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
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