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Precautionary Wealth Accumulation

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  • Mark Huggett

Abstract

When does an individual's expected wealth accumulation profile increase as earnings risk increases? This paper answers this question for multi-period models where earnings shocks are independent over time. Sufficient conditions are stated in terms of properties of a decision rule for savings and, alternatively, in terms of properties of preferences. Copyright 2004, Wiley-Blackwell.

Suggested Citation

  • Mark Huggett, 2004. "Precautionary Wealth Accumulation," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 769-781.
  • Handle: RePEc:oup:restud:v:71:y:2004:i:3:p:769-781
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2004.00303.x
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    References listed on IDEAS

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    16. Huggett, Mark & Vidon, Edouard, 2002. "Precautionary wealth accumulation: a positive third derivative is not enough," Economics Letters, Elsevier, vol. 76(3), pages 323-329, August.
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    Citations

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    Cited by:

    1. Fulford, Scott L., 2015. "The surprisingly low importance of income uncertainty for precaution," European Economic Review, Elsevier, vol. 79(C), pages 151-171.
    2. Carroll, Christopher D. & Kimball, Miles S., 2006. "Precautionary Saving and Precautionary Wealth," CFS Working Paper Series 2006/02, Center for Financial Studies (CFS).
    3. Scott Fulford, 2012. "The precaution of the rich and poor," Boston College Working Papers in Economics 814, Boston College Department of Economics.
    4. Suen, Richard M. H., 2011. "Concave consumption function and precautionary wealth accumulation," MPRA Paper 34774, University Library of Munich, Germany.
    5. Morissette, Rene & Ostrovsky, Yuri, 2005. "The Instability of Family Earnings and Family Income in Canada, 1986 to 1991 and 1996 to 2001," Analytical Studies Branch Research Paper Series 2005265e, Statistics Canada, Analytical Studies Branch.
    6. Ghiglino, Christian, 2005. "Wealth inequality and dynamic stability," Journal of Economic Theory, Elsevier, vol. 124(1), pages 106-115, September.
    7. Broer, Tobias, 2014. "Domestic or global imbalances? Rising income risk and the fall in the US current account," Journal of Monetary Economics, Elsevier, vol. 64(C), pages 47-67.
    8. Martin Kaae Jensen, 2012. "Distributional Comparative Statics," Discussion Papers 12-08, Department of Economics, University of Birmingham.
    9. Koulovatianos, Christos & Mirman, Leonard J. & Santugini, Marc, 2009. "Optimal growth and uncertainty: Learning," Journal of Economic Theory, Elsevier, vol. 144(1), pages 280-295, January.
    10. Daron Acemoglu & Martin Kaae Jensen, 2015. "Robust Comparative Statics in Large Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 123(3), pages 587-640.
    11. Huggett, Mark & Ospina, Sandra, 2001. "Aggregate precautionary savings: when is the third derivative irrelevant?," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 373-396, October.
    12. Gilles Joseph & Thomas Weitzenblum, 2003. "Optimal Unemployment Insurance: Transitional Dynamics vs. Steady State," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(4), pages 869-884, October.
    13. Sattinger, Michael, 2011. "The Markov consumption problem," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 409-416.
    14. Huggett, Mark & Vidon, Edouard, 2002. "Precautionary wealth accumulation: a positive third derivative is not enough," Economics Letters, Elsevier, vol. 76(3), pages 323-329, August.
    15. Agustin Roitman, 2011. "Precautionary Savings in a Small Open Economy Revisited," IMF Working Papers 11/253, International Monetary Fund.
    16. Luc Arrondel & Hector Calvo Pardo, 2008. "Les Français sont-ils prudents ? Patrimoine et risque sur les revenus des ménages," PSE Working Papers halshs-00585994, HAL.

    More about this item

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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