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How Changing Prudence and Risk Aversion Affect Optimal Saving

Buchholz, Wolfgang and Bauer, Christian J. (2008) How Changing Prudence and Risk Aversion Affect Optimal Saving. CESifo Working Paper Series 2438, Working Paper.

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Other URL: http://www.cesifo.de/DocCIDL/cesifo1_wp2438.pdf


We show how optimal saving in a two-period model is affected when prudence and risk aversion of the underlying utility function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate and the pure time discount rate, there is distributional neutrality between the two periods. Otherwise, changes of risk aversion that affect the distribution between the periods must also be taken into account.

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Item type:Monograph (Working Paper)
Date:October 2008
Institutions:Business, Economics and Information Systems > Institut für Volkswirtschaftslehre und Ökonometrie > Lehrstuhl für Finanzwissenschaft, insbesondere Umweltökonomie (Prof. Dr. Wolfgang Buchholz)
D110Journal of Economics Literature Classification
D810Journal of Economics Literature Classification
E210Journal of Economics Literature Classification
H430Journal of Economics Literature Classification
Keywords:prudence, risk aversion, saving, intergenerational distribution
Dewey Decimal Classification:300 Social sciences > 330 Economics
Refereed:No, this document will not be refereed
Created at the University of Regensburg:Partially
Item ID:9617
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