Precautionary Wealth Accumulation: A Positive Third Derivative is not Enough

Mark Huggett and Edouard Vidon ()
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Mark Huggett and Edouard Vidon: Department of Economics, Georgetown University, http://www9.georgetown.edu/faculty/mh5/
Authors registered in the RePEc Author Service: Mark Huggett and Edouard Vidon

Working Papers from Georgetown University, Department of Economics

Abstract: It is commonly conjectured that expected wealth accumulation increases when earnings risk increases as long as the utility function in each period is increasing, concave and has a positive third derivative. We present a counter example which highlights the importance of the convexity of the savings function.

JEL-codes: D80 D90 E21 (search for similar items in EconPapers)
Date: 2003-03-11
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Journal Article: Precautionary wealth accumulation: a positive third derivative is not enough (2002)
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