Do Non-Prudent Consumers Ever Engage in Precautionary Saving? Two Observations on Risk and Precautionary Saving

Luigi Ventura and Charles Horioka

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: In this paper, we first show that a particular form of precautionary saving, which we will call “intertemporal precautionary saving” to distinguish it from purely intertemporal and purely precautionary saving, will inevitably arise in the case of pure (downside) risk as long as consumers are risk-averse, even if they are not prudent. We then present a simple example that shows that even pure precautionary saving (i.e., saving generated by risk alone without effects on expected income) may arise as long as consumers are risk-averse, even if they are not prudent and even if risk is speculative (two-sided).

Date: 2025-11
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Related works:
Working Paper: Do Non-Prudent Consumers Ever Engage in Precautionary Saving? Two Observations on Risk and Precautionary Saving (2025)
Working Paper: Do Non-Prudent Consumers Ever Engage in Precautionary Saving? Two Observations on Risk and Precautionary Saving (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1297

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