IDEAS home Printed from
   My bibliography  Save this paper

Optimal saving in the presence of two small risks


  • M. Menegatti



We examine optimal saving in the presence of two small risks: income risk and a background risk. First, we compute the necessary and sufficient condition for a positive precautionary saving, showing that it depends on two terms capturing respectively the direct effect of income risk and the interaction between the two risks. Secondly, we examine the necessary and sufficient condition for a positive extra-saving due to the contemporaneous presence of the two risks. We show that this condition also depends on a term capturing the direct effect of background risk and that it can hold independently of the previous one.

Suggested Citation

  • M. Menegatti, 2008. "Optimal saving in the presence of two small risks," Economics Department Working Papers 2008-EP01, Department of Economics, Parma University (Italy).
  • Handle: RePEc:par:dipeco:2008-ep01

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521570176, March.
    2. Sakakibara, Mariko, 1997. "Evaluating government-sponsored R&D consortia in Japan: who benefits and how?," Research Policy, Elsevier, vol. 26(4-5), pages 447-473, December.
    3. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-338, May.
    4. Boix, Carles & Posner, Daniel N., 1998. "Social Capital: Explaining Its Origins and Effects on Government Performance," British Journal of Political Science, Cambridge University Press, vol. 28(04), pages 686-693, October.
    5. Narayan, Deepa & Pritchett, Lant, 1999. "Cents and Sociability: Household Income and Social Capital in Rural Tanzania," Economic Development and Cultural Change, University of Chicago Press, vol. 47(4), pages 871-897, July.
    6. Mothe, Caroline & Quélin, Bertrand, 2000. "Creating competencies through collaboration:: The case of EUREKA R&D consortia," European Management Journal, Elsevier, vol. 18(6), pages 590-604, December.
    7. Woolcock, Michael & Narayan, Deepa, 2000. "Social Capital: Implications for Development Theory, Research, and Policy," World Bank Research Observer, World Bank Group, vol. 15(2), pages 225-249, August.
    8. Ostrom, Elinor, 1996. "Crossing the great divide: Coproduction, synergy, and development," World Development, Elsevier, vol. 24(6), pages 1073-1087, June.
    9. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
    10. C. Monica Capra & Charles A. Holt, 1999. "Coordination," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 630-636, January.
    11. repec:hrv:faseco:30726298 is not listed on IDEAS
    12. Evans, Peter, 1996. "Government action, social capital and development: Reviewing the evidence on synergy," World Development, Elsevier, vol. 24(6), pages 1119-1132, June.
    13. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521578967, March.
    14. E. Roy Weintraub, 1992. "Introduction," History of Political Economy, Duke University Press, vol. 24(5), pages 3-12, Supplemen.
    15. Molinas, JoseR., 1998. "The impact of inequality, gender, external assistance and social capital on local-level cooperation," World Development, Elsevier, vol. 26(3), pages 413-431, March.
    16. A. Arrighetti & A. Guenzi, 2000. "Institutions and collective actions between firms," Economics Department Working Papers 2000-EP05, Department of Economics, Parma University (Italy).
    17. Sachwald, Frederique, 1998. "Cooperative agreements and the theory of the firm: Focusing on barriers to change," Journal of Economic Behavior & Organization, Elsevier, vol. 35(2), pages 203-225, April.
    18. A. Arrighetti & G. Seravalli, 2000. "Institutions and co-ordination costs," Economics Department Working Papers 2000-EP07, Department of Economics, Parma University (Italy).
    Full references (including those not matched with items on IDEAS)

    More about this item


    Precautionary saving; Background risk; Uncertainty;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:par:dipeco:2008-ep01. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Andrea Lasagni) or (Rebekah McClure). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.