New results on precautionary saving under two risks

Donatella Baiardi, Marzia De Donno, Marco Magnani and Mario Menegatti

Economics Letters, 2015, vol. 130, issue C, 17-20

Abstract: This paper identifies a new sufficient condition for a prudent agent to have positive precautionary saving in the presence of labor income and interest rate risks of any size. We also provide three economic interpretations for this condition focusing respectively on the marginal effect of saving on total income variance, on the sign of the covariance between total income and the return of saving, and on the effect of saving on the utility premium.

Keywords: Precautionary saving; Interest rate risk; Labor income risk; Prudence; Utility premium (search for similar items in EconPapers)
JEL-codes: D11 D81 E21 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:130:y:2015:i:c:p:17-20

DOI: 10.1016/j.econlet.2015.02.025

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