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Asymmetry in Precautionary Saving under Employment Uncertainty

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  • Kaushik Bhattacharya

    (Department of Statistical Analysis and Computer Services, Reserve Bank of India, Mumbai)

Abstract

This paper discusses the implications of asymmetry in future income on consumption under the specification of constant absolute risk aversion utility function with the help of a two period model. The only source of income uncertainty in the model is assumed to come from future employment. For the specification of binomial distribution of future labour supply, it is shown that precautionary saving is maximum near full employment. The sensitivity is found to increase as either the wage rate on the coefficient of absolute risk aversion of individuals increases.

Suggested Citation

  • Kaushik Bhattacharya, 1998. "Asymmetry in Precautionary Saving under Employment Uncertainty," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 33(1), pages 87-95, January.
  • Handle: RePEc:dse:indecr:v:33:y:1998:i:1:p:87-95
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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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