Asymmetry in Precautionary Saving under Employment Uncertainty
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.
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Volume (Year): 33 (1998)
Issue (Month): 1 (January)
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