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The effect of future income uncertainty in savings decision

Listed author(s):
  • Gomes, Fábio Augusto Reis
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    This paper analyzes consumption and savings decisions in a two-period consumption setting, supposing that future income is uncertain in the sense of Knight (Knight, F., 1921. Risk, uncertainty, and profit (Boston: Houghton Mi2in)). The results imply that uncertainty averse agents save more than risk averse agents.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165-1765(07)00164-4
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    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 98 (2008)
    Issue (Month): 3 (March)
    Pages: 269-274

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    Handle: RePEc:eee:ecolet:v:98:y:2008:i:3:p:269-274
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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    1. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
    2. repec:tiu:tiutis:bdbe10dd-649c-4521-ab28-7aa051a5bf82 is not listed on IDEAS
    3. Das, J.W.M. & van Soest, A.H.O., 1996. "A panel data model for subjective information on household income growth," Other publications TiSEM a6683363-b5a6-4fe7-b062-7, Tilburg University, School of Economics and Management.
    4. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    5. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
    6. Das, Marcel & van Soest, Arthur, 1997. "Expected and realized income changes: Evidence from the Dutch socio-economic panel," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 137-154, January.
    7. Christopher D. Carroll, 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 1-55.
    8. Mukerji, S. & Tallon, J.-M., 1999. "Ambiguity Aversion and Incompleteness of Financial Markets," Papiers d'Economie Mathématique et Applications 1999-28, Université Panthéon-Sorbonne (Paris 1).
    9. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    10. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, Enero.
    11. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
    12. Dow, James & Werlang, Sergio Ribeiro da Costa, 1992. "Uncertainty Aversion, Risk Aversion, and the Optimal Choice of Portfolio," Econometrica, Econometric Society, vol. 60(1), pages 197-204, January.
    13. Itzhak Gilboa, 1987. "Expected Utility with Purely Subjective Non-Additive Probabilities," Post-Print hal-00756291, HAL.
    14. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    15. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
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