Precautionary Saving with Changing Income Ambiguity
Atsushi Kajii and
Jingyi Xue ()
Additional contact information
Jingyi Xue: School of Economics, Singapore Management University
No 2-2017, Economics and Statistics Working Papers from Singapore Management University, School of Economics
We study a two-period saving model where the agent’s future income might be ambiguous. Our agent has a version of the smooth ambiguity decision criterion (Klibanoff, Marinacci and Mukerji (2005)), where the agent’s perception about ambiguity is described by a second-order belief over first-order risks. We model increasing ambiguity as a spreading-out of the second-order belief. We show that under a “Risk Comonotonicity” condition, our agent saves more when ambiguity in future income increases. We argue that the condition is indispensable for our result.
Keywords: Precautionary Saving; Smooth Ambiguity; Increasing Ambiguity; Risk Comonotonicity; Informativeness (search for similar items in EconPapers)
JEL-codes: D80 D81 D91 E21 (search for similar items in EconPapers)
Pages: 12 pages
New Economics Papers: this item is included in nep-mac, nep-mic, nep-sea and nep-upt
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://ink.library.smu.edu.sg/soe_research/1905/ Full text (application/pdf)
Working Paper: Precautionary saving with changing income ambiguity (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ris:smuesw:2017_002
Access Statistics for this paper
More papers in Economics and Statistics Working Papers from Singapore Management University, School of Economics 90 Stamford Road, Sigapore 178903. Contact information at EDIRC.
Bibliographic data for series maintained by Cheong Pei Qi ().