Precautionary Effort: A New Look |
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| Authors: | Louis Eeckhoudt Rachel J Huang Larry Y Tzeng |
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| Institution: | Louis Eeckhoudt is Professor at IESEG School of Management, LEM, Lille, France. Rachel J. Huang is Associate Professor at Graduate Institute of Finance, National Taiwan University of Science and Technology, Taipei, Taiwan. Larry Y. Tzeng is Professor in Department of Finance, National Taiwan University, Taipei, Taiwan. Both Rachel J. Huang and Larry Y. Tzeng are research fellows at Risk and Insurance Research Center, College of Commerce, NCCU. Rachel J. Huang can be contacted via e‐mail: rachel@mail.ntust.edu.tw. |
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| Abstract: | While the concept of precautionary saving is well documented, that of precautionary effort has received relatively limited attention. In this note, we set up a two period model in order to analyze the conditions under which the introduction (or deterioration) of an independent background risk increases effort. |
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