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Does government growth reduce precautionary saving?

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  • Dimitris Hatzinikolaou

Abstract

The paper extends the constant-relative-risk-aversion model by endogenizing the Arrow-Pratt coefficient of relative risk aversion. The empirical application treats this coefficient as a linear function of the rate of growth of real government expenditure per worker and estimates a Euler equation for consumption using Greek annual aggregate data for the period 1960-1993. The results support the view that government growth may cause a typical consumer to become less risk averse and save less.

Suggested Citation

  • Dimitris Hatzinikolaou, 1997. "Does government growth reduce precautionary saving?," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 419-423.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:4:p:419-423
    DOI: 10.1080/000368497326912
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    2. Konstantinos Angelopoulos & Apostolis Philippopoulos, 2007. "The growth effects of fiscal policy in Greece 1960–2000," Public Choice, Springer, vol. 131(1), pages 157-175, April.

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