Economics at your fingertips  

Risk Aversion and Precautionary Savings in Dynamic Settings

Antoine Bommier () and François Le Grand ()
Additional contact information
Antoine Bommier: Department of Management, Technology and Economics, ETH Zurich, 8092 Zurich, Switzerland
François Le Grand: emlyon Business School, 69130 Écully, France; ETH Zurich, 8092 Zurich, Switzerland

Management Science, 2019, vol. 65, issue 3, 1386-1397

Abstract: We study the saving behavior of infinitely long-lived agents who face income uncertainty and deterministic interest rates. Using monotone recursive preferences, we prove that risk aversion unambiguously increases savings. The result accounts for possibly binding borrowing constraints and holds for very general specification of income uncertainty, which can follow any kind of stochastically monotone process.

Keywords: risk aversion; precautionary savings; recursive models; risk-sensitive preferences; monotonicity (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Matthew Walls ().

Page updated 2020-12-02
Handle: RePEc:inm:ormnsc:v:65:y:2019:i:3:p:1386-1397