A new interpretation for the precautionary saving motive: a note |
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Authors: | M Menegatti |
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Institution: | (1) Dipartimento di Economia, Università di Parma, via Kennedy 6, 43100 Parma, Italy |
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Abstract: | This paper proposes a new interpretation for the precautionary saving motive: when future income is uncertain, agents increase
saving in order to cause a reduction in the disutility due to uncertainty. Furthermore, the paper shows that the usual necessary
and sufficient condition for precautionary saving is the condition ensuring this effect to occur and gives new insights into
the relationship between risk aversion indexes and precautionary saving.
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Keywords: | precautionary saving risk aversion prudence |
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