Data and code for: "Permanent income shocks, target wealth and the wealth gap"

We test the key implication of the buffer stock
model, namely that any revision in permanent income
leads to a proportionate revision in target wealth. We use panel data on the amount of
wealth that people think they must hold for precautionary purposes. Using the
covariance restrictions that the model imposes on the joint behavior of income
and target wealth, we find that households indeed revise approximately
one-for-one their target wealth in response to permanent income shocks. The
speed of adjustment of actual wealth to target wealth is
similar to that obtained in simulations of a buffer stock model.