A note on a new interpretation for the precautionary saving motive
AbstractThis paper proposes a new interpretation for the precautionary saving motive: when future income is uncertain, agents increase saving in order to cause a reduction in the disutility due to uncertainty. Furthermore the paper shows that the usual necessary and sufficient condition for precautionary saving is the condition ensuring this effect to occur.
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Bibliographic InfoPaper provided by Department of Economics, Parma University (Italy) in its series Economics Department Working Papers with number 2006-EP05.
Length: 8 pages
Date of creation: 2006
Date of revision:
Precautionary saving; Risk aversion; Prudence;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-21 (All new papers)
- NEP-FMK-2006-10-21 (Financial Markets)
- NEP-MAC-2006-10-21 (Macroeconomics)
- NEP-UPT-2006-10-21 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dreze, Jacques H. & Modigliani, Franco, 1972.
"Consumption decisions under uncertainty,"
Journal of Economic Theory, Elsevier,
Elsevier, vol. 5(3), pages 308-335, December.
- DREZE, Jacques H. & MODIGLIANI, Franco, . "Cosumption decisions under uncertainty," CORE Discussion Papers RP, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE) -119, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Miles S. Kimball, 1989.
"Precautionary Saving in the Small and in the Large,"
NBER Working Papers
2848, National Bureau of Economic Research, Inc.
- Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, Econometric Society, vol. 58(1), pages 53-73, January.
- Sandmo, Agnar, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 37(3), pages 353-60, July.
- Menegatti, Mario, 2001. "On the Conditions for Precautionary Saving," Journal of Economic Theory, Elsevier, Elsevier, vol. 98(1), pages 189-193, May.
- Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 56, pages 279.
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