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Precautionary savings

About: Precautionary savings is a research topic. Over the lifetime, 1007 publications have been published within this topic receiving 38483 citations.


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Journal ArticleDOI
TL;DR: In this article, the authors present a qualitative and quantitative analysis of the standard growth model modified to include precautionary saving motives and liquidity constraints, and address the impact on the aggregate saving rate, the importance of asset trading to individuals, and the relative inequality of wealth and income distributions.
Abstract: We present a qualitative and quantitative analysis of the standard growth model modified to include precautionary saving motives and liquidity constraints. We address the impact on the aggregate saving rate, the importance of asset trading to individuals, and the relative inequality of wealth and income distributions.

2,738 citations

ReportDOI
TL;DR: In this paper, the Arrow-Pratt theory of risk aversion is applied to the theory of optimal choice under risk, and a measure of the strength of the precautionary saving motive analogous to the ArrowPratt measure of risk avoidance is used to establish a number of new propositions about the necessity of saving and give a new interpretation of the Dreze-Modigliani substitution effect.
Abstract: The theory of precautionary saving is shown to be isomorphic to the Arrow-Pratt theory of risk aversion, making possible the application of a large body of knowledge about risk aversion to precautionary saving--and more generally, to the theory of optimal choice under risk. In particular, a measure of the strength of the precautionary saving motive analogous to the Arrow-Pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving and to give a new interpretation of the Dreze-Modigliani substitution effect. Copyright 1990 by The Econometric Society.

1,555 citations

ReportDOI
TL;DR: In this article, the authors discuss the theory of saving when consumers are not permitted to borrow, and the ability of such a theory to account for some of the stylized facts of saving behavior.
Abstract: This paper is concerned with the theory of saving when consumers are not permitted to borrow, and with the ability of such a theory to account for some of the stylized facts of saving behavior. The models presented in the paper seem to account for important aspects of reality that are not explained by traditional life-cycle models. Copyright 1991 by The Econometric Society.

1,446 citations

Journal ArticleDOI
TL;DR: In this article, a two-period model was developed to analyze rigorously the precautionary demand for saving, which is defined as the extra saving caused by future income being random rather than determinate.
Abstract: Publisher Summary This chapter discusses a two-period model developed to analyze rigorously the precautionary demand for saving. The precautionary demand for saving is usually described as the extra saving caused by future income being random rather than determinate. The effect of uncertainty on saving becomes obfuscated by generality. Many of the usual outlets for consumer saving, including saving deposits and government bonds, offer a fixed monetary rate of return. A multi-period model would be necessary to explore fully the effect of assets on the precautionary demand for saving. Until further progress is made with the more powerful inter-temporal models of optimization under uncertainty, the two-period model must be accepted along with its conclusion that states that under reasonable assumptions, there exists a positive precautionary demand for saving.

1,277 citations

Journal ArticleDOI
TL;DR: This paper argued that the typical household saving behavior is better described by a buffer stock model than by the traditional version of the Life Cycle/Permanent Income Hypothesis (LC/PIH) model.
Abstract: This paper argues that the typical household’s saving is better described by a “bufferstock” version than by the traditional version of the Life Cycle/Permanent Income Hypothesis (LC/PIH) model. Buffer-stock behavior emerges if consumers with important income uncertainty are sufficiently impatient. In the traditional model, consumption growth is determined solely by tastes; in contrast, buffer-stock consumers set average consumption growth equal to average labor income growth, regardless of tastes. The model can explain three empirical puzzles: the “consumption/income parallel” of Carroll and Summers [1991]; the “consumption/income divergence” first documented in the 1930's; and the temporal stability of the household age/wealth profile despite the unpredictability of idiosyncratic wealth changes.

1,207 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
20235
202214
202141
202035
201952
201837