Precautionary saving under recursive preferences

Aj Bostian and Christoph Heinzel ()
Additional contact information
Aj Bostian: School of Social Sciences and Humanities, University of Tampere
Christoph Heinzel: SMART - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement, INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Post-Print from HAL

Abstract: The preferences responsible for precautionary saving under recursive utility can be decomposed into two channels. One exactly mirrors expected utility, while the other is unique to recursive utility. Although these channels contain numerous competing saving effects, theoretical and numerical comparative statics point to some generalizable features. Risk preferences drive most of precautionary saving, and they are the only higher-order preferences ever expressed. But, plain 2nd-order intertemporal preferences (consumption smoothing) influence total saving far more than any other kind of preference. Precautionary responses to risks beyond 2nd order are minimal. Responses to return risk are typically negative.

Keywords: Precautionary saving; Prudence; Consumption smoothing; Recursive preferences; Return risk; Higher-order risk (search for similar items in EconPapers)
Date: 2024-10-24
References: Add references at CitEc
Citations:

Published in Journal of Economic Behavior and Organization, 2024, 228, pp.106770. ⟨10.1016/j.jebo.2024.106770⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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: https://EconPapers.repec.org/RePEc:hal:journl:hal-04752951

DOI: 10.1016/j.jebo.2024.106770

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().