A Note about Savings as a "Nonpositional Good."

George Kosicki

Eastern Economic Journal, 1988, vol. 14, issue 3, 271-276

Abstract: Empirical evidence contradicts the view that savings rates are independent of permanent income levels. Instead, a distinctive nonlinear relationship between savings and permanent income has been found. What explains this result? Using Robert Frank's model of the demand for nonpositional goods, this note explores the impact that treating savings as a nonpositional good has on the relationship between savings and permanent income. Frank's model is extended and predictions are generated for various income distributions and utility function parameters. The similarity of the predictions to existing evidence increases as more weight is given to current consumption rank.

Date: 1988
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