The marginal propensity to consume and multidimensional risk

Kimball (1990a,b) established that income risk increases the marginal propensity to consume if and only if absolute prudence decreases. We characterize decreasing and increasing multivariate prudence and show that a multidimensional risk increases the marginal propensity to consume if and only if absolute prudence decreases with wealth, in the sense that its derivative is negative-definite.

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Year of publication:	2013
Authors:	Jouini, Elyès ; Napp, Clotilde ; Nocetti, Diego
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 119.2013, 2, p. 124-127
Publisher:	Elsevier
Subject:	Marginal propensity to consume \| Multivariate risk \| Prudence

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Type of publication:	Article
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving ; E21 - Consumption; Saving
Source:	RePEc - Research Papers in Economics

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