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Precautionary Saving and Altruism

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  • Nordblom, Katarina

    (Department of Economics)

Abstract

The 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 Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1997:19.

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Length: 29 pages
Date of creation: 28 Aug 1997
Date of revision:
Handle: RePEc:hhs:uunewp:1997_019

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: Precautionary saving; altruism; risk sharing; marriage; intra-family insurance;

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  1. Eric M. Engen & Jonathan Gruber, 1995. "Unemployment Insurance and Precautionary Saving," NBER Working Papers 5252, National Bureau of Economic Research, Inc.
  2. Christopher D. Carroll, 1992. "How does future income affect current consumption?," Working Paper Series / Economic Activity Section 126, Board of Governors of the Federal Reserve System (U.S.).
  3. Merrigan, Philip & Normandin, Michel, 1996. "Precautionary Saving Motives: An Assessment from UK Time Series of Cross-Sections," Economic Journal, Royal Economic Society, vol. 106(438), pages 1193-1208, September.
  4. Peter Kooreman & Arie Kapteyn, 1990. "On the Empirical Implementation of Some Game Theoretic Models of Household Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 584-598.
  5. Konrad, K.A. & Lommerud, K.E., 2000. "The Bargaining Family Revisited," Norway; Department of Economics, University of Bergen 212, Department of Economics, University of Bergen.
  6. Jonathan Gruber & Julie Berry Cullen, 1996. "Spousal Labor Supply as Insurance: Does Unemployment Insurance Crowd Outthe Added Worker Effect?," NBER Working Papers 5608, National Bureau of Economic Research, Inc.
  7. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," UCLA Economics Working Papers 151, UCLA Department of Economics.
  8. Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
  9. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
  10. Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
  11. Agell, Jonas & Lommerud, Kjell Erik, 1992. "Union Egalitarianism as Income Insurance," Economica, London School of Economics and Political Science, vol. 59(235), pages 295-310, August.
  12. Hayashi, Fumio & Altonji, Joseph & Kotlikoff, Laurence, 1996. "Risk-Sharing between and within Families," Econometrica, Econometric Society, vol. 64(2), pages 261-94, March.
  13. Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, vol. 81(4), pages 859-71, September.
  14. Lindbeck, Assar & Weibull, Jorgen W, 1988. "Altruism and Time Consistency: The Economics of Fait Accompli," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1165-82, December.
  15. Sandmo, Agnar, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Wiley Blackwell, vol. 37(3), pages 353-60, July.
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Cited by:
  1. Enrique Alberola & Rodrigo César Salvado, 2006. "Banks, remittances and financial deepening in receiving countries. A model," Banco de Espa�a Working Papers 0621, Banco de Espa�a.

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