Risk and Savings: a Taxonomy

Jan Willem Gunning

No 08-071/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper resulted in a publication in 'Economics Letters' , 2010, 107(1), 39-41.

Risk may induce precautionary saving but it can also reduce saving. The theoretical literature recognizes both possibilities, but favors a positive effect (both for developed and developing countries); the empirical literature is divided, reporting (small) positive effects for developed economies and (large) negative effects for developing countries. We show in a 2-period model how the effect of risk on savings depends not only on preferences but also on the type of risk.

Keywords: Theory Consumer Economics; Intertemporal Consumer Choice; Microeconomic Analyses of Economic Development; Economic Development; Financial Markets; Saving and Capital Investment; Corporate Finance and Governance (search for similar items in EconPapers)
JEL-codes: D11 D91 O12 O16 (search for similar items in EconPapers)
Date: 2008-08-08
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Journal Article: Risk and savings: A taxonomy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20080071

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