Precautionary Wealth Accumulation: A Positive Third Derivative is not Enough
AbstractIt is commonly conjectured that expected wealth accumulation increases when earnings risk increases as long as the utility function in each period is increasing, concave and has a positive third derivative. We present a counter example which highlights the importance of the convexity of the savings function.
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Bibliographic InfoPaper provided by Georgetown University, Department of Economics in its series Working Papers with number gueconwpa~03-03-11.
Date of creation: 11 Mar 2003
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Postal: Georgetown University Department of Economics Washington, DC 20057-1036
Web page: http://econ.georgetown.edu/
Postal: Marcia Suss Administrative Officer Georgetown University Department of Economics Washington, DC 20057-1036
Other versions of this item:
- Huggett, Mark & Vidon, Edouard, 2002. "Precautionary wealth accumulation: a positive third derivative is not enough," Economics Letters, Elsevier, vol. 76(3), pages 323-329, August.
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- D90 - Microeconomics - - Intertemporal Choice - - - General
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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