A note on the relevance of prudence in precautionary saving.

The aim of this note is to suggest that prudence, i.e. convexity of marginal utility, can only explain a small share of precautionary savings, which we may define as savings generated by variance in income. Therefore, if we are willing to admit that precautionary savings constitute a sizable share of total savings, other factors should be called for. We present a few examples showing that risk aversion might constitute one such factor.

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Year of publication:	2007-06-17
Authors:	Ventura, Luigi
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 4.2007, 23, p. 1-11
Publisher:	AccessEcon

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Extent:	application/pdf
Type of publication:	Article
Classification:	D8 - Information and Uncertainty ; G0 - Financial Economics. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010836324