Risk and Saving in Two-Person Households: More Scope for Precautionary Saving
AbstractThe existing literature suggests that when the saving decision of two-earner households under risk is analysed, standard results on the existence of precautionary saving no longer apply: precautionary saving is obtained if and only if very stringent conditions hold. This paper shows that when the two-earner households saving decision is formulated more generally, standard assumptions suffice for precautionary saving to exist under increases in risk of the first and second orders, but not for higher orders.
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Bibliographic InfoPaper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 674.
Date of creation: Nov 2012
Date of revision:
Two-earner households; risk order; precautionary saving;
Other versions of this item:
- Apps, Patricia & Andrienko, Yuri & Rees, Ray, 2012. "Risk and Saving in Two-Person Households: More Scope for Precautionary Saving," IZA Discussion Papers 6824, Institute for the Study of Labor (IZA).
- D10 - Microeconomics - - Household Behavior - - - General
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- D14 - Microeconomics - - Household Behavior - - - Personal Finance
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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