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The marginal propensity to consume and multidimensional risk

Jouini, Elyès; Napp, Clotilde; Nocetti, Diego (2013), The marginal propensity to consume and multidimensional risk, Economics Letters, 119, 2, p. 124-127. http://dx.doi.org/10.1016/j.econlet.2013.02.002

Type
Article accepté pour publication ou publié
External document link
https://halshs.archives-ouvertes.fr/halshs-00927262
Date
2013
Journal name
Economics Letters
Volume
119
Number
2
Publisher
Elsevier
Pages
124-127
Publication identifier
Metadata
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Author(s)
Jouini, Elyès

Napp, Clotilde cc

Nocetti, Diego
Abstract (EN)
Kimball, 1990a and Kimball, 1990b established that income risk increases the marginal propensity to consume if and only if absolute prudence decreases. We characterize decreasing and increasing multivariate prudence and show that a multidimensional risk increases the marginal propensity to consume if and only if absolute prudence decreases with wealth, in the sense that its derivative is negative-definite.
Subjects / Keywords
Marginal propensity to consume; Multivariate risk; Prudence
JEL
D81 - Criteria for Decision-Making under Risk and Uncertainty
D91 - Intertemporal Household Choice; Life Cycle Models and Saving
E21 - Consumption; Saving; Wealth