The objective of this research paper is to examine the consumption and precautionary saving behavior in Thailand due to income uncertainty which lead to the divergence of the Life Cycle / Permanent Income Hypothesis. Using data from Household Socio-Economic Survey (SES) 2006, the study explores the existence of precautionary saving in various consumers’ groups, including different age group, income group, education group and region group. The sample size is 42,484 households. The permanent income function is forecasted based on permanent income theory. Households were systematically grouped to solve problems that may arise from the limitations of cross section data. Then, data is estimated through consumption function based on Zhou (2003). The study found precautionary saving exhibits in three groups of household; low-income working age household, low-income household which household head does not have salary based and low-income household which does not reside in Bangkok Metropolitan area. However the finding can not summarize that low-income with high education or low-income with low education household is precautionary saving behavior because of the education indicator difference. Hence, the government should reduce the income uncertainty from the mentioned household for consumer stability. Moreover the government can control precautionary saving, a part of private saving, to reach the optimal level by reduce or boost the household uncertainty level factor.
