A note on the relevance of prudence in precautionary saving
AbstractThe aim of this note is to suggest that prudence, i.e. convexity of marginal utility, can only explain a small share of precautionary savings, which we may define as savings generated by variance in income. Therefore, if we are willing to admit that precautionary savings constitute a sizable share of total savings, other factors should be called for. We present a few examples showing that risk aversion might constitute one such factor.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 4 (2007)
Issue (Month): 23 ()
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Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G0 - Financial Economics - - General
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- Carol Newman & Fiona Wainwright, 2011. "Income Shocks and Household Risk-Coping Strategies: Evidence from Rural Vietnam," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp358, IIIS.
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