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The marginal propensity to consume and multidimensional risk

Elyès Jouini (jouini@ceremade.dauphine.fr), Clotilde Napp and Diego Nocetti

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Abstract: Kimball (1990) established that income risk increases the marginal propensity to consume if and only if absolute prudence is decreasing. We characterize decreasing and increasing multivariate prudence and we show that a multidimensional risk increases the marginal propensity to consume if and only if a matrix-measure of multivariate prudence decreases with wealth, in the sense that its derivative is negative-de nite.

Keywords: Marginal propensity to consume; Multivariate risk; Prudence (search for similar items in EconPapers)
Date: 2013-05-01
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00927262
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Published in Economics Letters, 2013, 119 (2), pp.124-127

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