Precautionary Saving in the Small and in the Large
The theory of precautionary saving is shown to be isomorphic to the Arrow-Pratt theory of risk aversion, making possible the application of a large body of knowledge about risk aversion to precautionary saving--and more generally, to the theory of optimal choice under risk. In particular, a measure of the strength of the precautionary saving motive analogous to the Arrow-Pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving and to give a new interpretation of the Dreze-Modigliani substitution effect. Copyright 1990 by The Econometric Society.
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Volume (Year): 58 (1990)
Issue (Month): 1 (January)
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- Kimball, Miles S & Mankiw, N Gregory, 1989.
"Precautionary Saving and the Timing of Taxes,"
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- A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 353-360. Full references (including those not matched with items on IDEAS)
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