How Certain are Dutch Households about Future Income? An Empirical Analysis

The growing literature on precautionary saving clearly indicates the need for measurement of income uncertainty. In this paper we empirically analyze subjective income uncertainty in the Netherlands. Data come from the Dutch VSB panel. We measure income uncertainty directly by asking questions on expected household income in the next twelve months. First, we describe our data and compare a measure of income uncertainty with corresponding studies conducted in the US and Italy. Second, we investigate the relationship between the measure of income uncertainty and some household characteristics. Controlling for information on expected changes, we find strong relationships between labor-market characteristics and the subjective income uncertainty as reported by the heads of households.