Precautionary Wealth Accumulation: A Positive Third Derivative is not Enough

It is commonly conjectured that expected wealth accumulation increases when earnings risk increases as long as the utility function in each period is increasing, concave and has a positive third derivative. We present a counter example which highlights the importance of the convexity of the savings function.

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Year of publication:	2003-03-11
Authors:	Huggett, Mark ; Vidon, Edouard
Institutions:	Georgetown University, Department of Economics

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Classification:	D80 - Information and Uncertainty. General ; D90 - Intertemporal Choice and Growth. General ; E21 - Consumption; Saving
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005396400