EconPapers    
Economics at your fingertips  
 

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

Abstract: 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
Date: 2016-06-06
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)

Related works:
Working Paper: Precautionary saving with changing income ambiguity (2016) Downloads
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: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 ().

 
Page updated 2020-10-26
Handle: RePEc:ris:smuesw:2017_002