In all three countries, households already owning most of the standard consumer durables save less compared to households lacking such durables. One interpretation of the result is a negative real wealth effect. If so, one would however expect a matching finding for the other ownership dummies, which is not the case: only two of the other eight dummies are significant.<sup>8</sup> A second explanation combines a catchup motives with the lack of retail credit markets. As rmentioned above, initial durable ownership in the three transition economies fell short of levels observed in market economnies with comparable: income levels, reflecting the low priority given to such products under the plan. To the extent that preferences in the transition economies are comparable to those in market economies, the transition created a catchup demand for these durables. In the absence of functioning retail credit markets, this in turn implied to need to accumulate the purchase prior through savings prior to the transactions [Japelli and Pagano (1989,1994), Guiso, Jappelli and Terlizzese (1992)].

The effect of employment on savings behavior offers a direct window on the importance of likely lifetime income growth and income risk pattems. Wi'hile it is difficult to generalize, it seems not unreasonable to assume that households deriving most of their income frorn self-employment or from private employment on average were characterized by steeply upward sloping income profiles compared to households deriving their income from the public sector or relying on the social safety net. Selfemployment was a rare exception in the pre-transition period; this category of households is thus most likely to have started a business since 1989, suggesting a skill pattern conducive to benefiting from the transition. The relative income profiles of private compared to public employment are influenced by two factors. First, it, stands to reason that the more attractive enterprises were privatized first, thus the core growth rate of firms with private ownership and thus employment likely exceeded that of firms remaining in public hands. Second, employment in pnrvatized enterprises was reduced to a much greater extent compared to publicly owned firms, to the degree that the firing decisions were skill based, the remaining employees in private sector firms have higher average skills compared to public sector employees.<sup>9</sup> The different rates of employment reduction suggest that the chance of future unemployment, and thus income uncertainty, was also larger for employees remaining in publicly owned enterprises. If so, both the consumption smoothing and the precautionary savings model would imply lower savings rates for private sector employees.

Households deriving their main income from self-employment or from wages indeed save less compared to the reference group (households receiving public

> **s** A negative wealth elasticity of savings would also be at odds with much of the existing empirical literature [Avery and Kennickell (1991) or Bosworth, Burtless and Sabelbaus (1991), :.nter alia]. 9 Differences between occupation groups are of course notoriously difficult to interpret, as occupation choice itself is endogenous [Skinner (1988) and Carroll (1994)]. In this respect, however, the transition data are arguably less problematic, as it seems reasonable to assume that few households selected their pretransition employment with a view towards a possible collapse of the socialist system, furthermore, employment choice was highly restricted under the central planning system.