New results on precautionary saving under two risks

This paper identifies a new sufficient condition for a prudent agent to have positive precautionary saving in the presence of labor income and interest rate risks of any size. We also provide three economic interpretations for this condition focusing respectively on the marginal effect of saving on total income variance, on the sign of the covariance between total income and the return of saving, and on the effect of saving on the utility premium.

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Year of publication:	2015
Authors:	Baiardi, Donatella ; De Donno, Marzia ; Magnani, Marco ; Menegatti, Mario
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 130.2015, C, p. 17-20
Publisher:	Elsevier
Subject:	Precautionary saving \| Interest rate risk \| Labor income risk \| Prudence \| Utility premium

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Type of publication:	Article
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; E21 - Consumption; Saving ; D11 - Consumer Economics: Theory
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011263406