Precautionary Saving and Altruism
AbstractThe potential importance of the precautionary motive for saving has been noted in many studies during the last decades. This paper examines the determination of precautionary saving when people have access to intra-family risk sharing. I show that, with uncertain future income, altruism per se can induce time consistent, however, not necessarily ex ante efficient, risk sharing between risk averse spouses. The more altruistic the couple is, the closer is the solution to the efficient one. Also welfare and savings effects from social insurance turn out to be sensitive to assumptions about family structure. For risk sharing couples, the introduction of a compulsory insurance scheme may have substantially smaller effects on welfare and precautionary savings.
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Bibliographic InfoPaper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1997:19.
Length: 29 pages
Date of creation: 28 Aug 1997
Date of revision:
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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
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Precautionary saving; altruism; risk sharing; marriage; intra-family insurance;
Other versions of this item:
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-08-31 (All new papers)
- NEP-ENV-1998-08-31 (Environmental Economics)
- NEP-MIC-1998-08-31 (Microeconomics)
- NEP-PBE-1998-08-31 (Public Economics)
- NEP-PUB-1998-08-31 (Public Finance)
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