Risk Aversion and Precautionary Savings in Dynamic Settings

We study how risk aversion affects precautionary savings when considering monotone recursive Kreps-Porteus preferences. In a general infinite-horizon setting, we prove that risk aversion unambiguously increases precautionary savings. The result is derived without specifying income uncertainty, which can follow any kind of stochastically monotone process, and accounting for possibly binding borrowing constraints

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Year of publication:	2016
Authors:	Bommier, Antoine ; Le Grand, François
Publisher:	[S.l.] : SSRN
Subject:	Risikoaversion \| Risk aversion \| Sparen \| Savings \| Theorie \| Theory \| Risiko \| Risk \| Vorsichtssparen \| Precautionary saving

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