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Risk and Saving in Two-Person Households: More Scope for Precautionary Saving

Patricia Apps (), Yuri Andrienko and Ray Rees

No 674, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

Abstract: The existing literature suggests that when the saving decision of two-earner households under risk is analysed, standard results on the existence of precautionary saving no longer apply: precautionary saving is obtained if and only if very stringent conditions hold. This paper shows that when the two-earner households saving decision is formulated more generally, standard assumptions suffice for precautionary saving to exist under increases in risk of the first and second orders, but not for higher orders.

Keywords: Two-earner households; risk order; precautionary saving (search for similar items in EconPapers)
JEL-codes: D10 D13 D14 D81 D91 E21 (search for similar items in EconPapers)
Date: 2012-11
New Economics Papers: this item is included in nep-upt
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