Optimal Saving with Additive and Multiplicative Background Risk
We study optimal saving when incomes are certain and risk bears on consumption. A key finding is that, with CARA utility and additive uncertain consumption, or CRRA utility and multiplicative consumption, risk-averse individuals do not form precautionary saving as in the standard theory of saving under uncertainty.
|Date of creation:||01 Oct 2004|
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NBER Working Papers
2848, National Bureau of Economic Research, Inc.
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"Cosumption decisions under uncertainty,"
CORE Discussion Papers RP
119, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Discussion Papers, various Research Units
FS IV 02-06, Social Science Research Center Berlin (WZB).
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- Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249, March.
- Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 82(3), pages 465-473.
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