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Precautionary Saving in the Small and in the Large

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  • Kimball, Miles S

Abstract

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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  • Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    • Handle: RePEc:ecm:emetrp:v:58:y:1990:i:1:p:53-73
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