Precautionary saving in a Markovian earnings environment

Bar Light

doi:10.1016/j.red.2017.12.004

Precautionary saving in a Markovian earnings environment

Research output: Contribution to journal › Article › peer-review

Abstract

Under what conditions does an increase in the future income risk (in the sense of second order stochastic dominance) result in an increase in savings? This paper establishes a novel sufficient condition for the case in which income follows a Markov process. The sufficient condition applies to a broad class of preferences and processes that are often adopted in the applied literature.

Original language	English
Pages (from-to)	138-147
Number of pages	10
Journal	Review of Economic Dynamics
Volume	29
DOIs	https://doi.org/10.1016/j.red.2017.12.004
State	Published - Jul 2018
Externally published	Yes

Keywords

Comparative statics
Consumption
Income uncertainty
Precautionary savings
Prudence
Savings

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10.1016/j.red.2017.12.004

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title = "Precautionary saving in a Markovian earnings environment",

abstract = "Under what conditions does an increase in the future income risk (in the sense of second order stochastic dominance) result in an increase in savings? This paper establishes a novel sufficient condition for the case in which income follows a Markov process. The sufficient condition applies to a broad class of preferences and processes that are often adopted in the applied literature.",

keywords = "Comparative statics, Consumption, Income uncertainty, Precautionary savings, Prudence, Savings",

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year = "2018",

month = jul,

doi = "10.1016/j.red.2017.12.004",

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Precautionary saving in a Markovian earnings environment

Abstract

Keywords

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