The marginal propensity to consume and multidimensional risk

Elyès Jouini (), Clotilde Napp and Diego Nocetti

Economics Letters, 2013, vol. 119, issue 2, 124-127

Abstract: 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.

Keywords: Marginal propensity to consume; Multivariate risk; Prudence (search for similar items in EconPapers)
JEL-codes: D81 D91 E21 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:119:y:2013:i:2:p:124-127

DOI: 10.1016/j.econlet.2013.02.002

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