The uncertainty effect on saving decisions

Uncertainty plays a significant role on consumption and saving decisions under rather mild conditions, namely the convexity of the marginal utility of consumption. Increased uncertainty generates a positive extra saving, the “precautionary saving”. Although this hypothesis has been tested by a large number of authors, both at macro and micro level, the empirical results are not conclusive, and the main conclusion than can be drawn is that there is neither consensus on the intensity of that motive for saving, nor on the most appropriate measure of uncertainty. This thesis test the effect of the uncertainty on consumption/saving decisions of Spanish households through an empirical analysis with data from the Survey of Households Finances.