The theory of precautionary saving suggests that earnings uncertainty lowers the average propensity to consume but increases the marginal propensity. In this paper we provide a new test of these propositions. We compare the consumption behaviour of households with varying numbers of income earners. If multiple-income households share their income risks, the uncertainty of individual incomes and the need for precautionary saving are attenuated. The data taken from the 1987 Italian Survey of Household Income and Wealth support the theory. Other things being equal households with two income earners have a higher average propensity to consume out of lifetime wealth than households with only one income earner, and a lower marginal propensity to consume. The results suggest that the increase in female labour force participation and in the proportion of multiple income households constitutes a partial explanation for the reduction in saving in the Italian economy in the eighties and for the international variation in saving rates.
This paper - presented at the Workshop on "Saving in Italy: Past and Future Trends, Household and Government Behaviour", held in Rome on 16-17 January 1992 - is part of a research project undertaken at the Bank of Italy. The Italian versions of all the contributions will be published in a special issue of "Contributi all'analisi economica".
An earlier version of this paper was presented to the Meeting of the European Economic Association,Cambridge, August 28-30,1991.
