Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2008-08-08 Number: 08-071/2 Author-Name: Jan Willem Gunning Author-Email: email@example.com Author-Workplace-Name: Vrije Universiteit Amsterdam Title: Risk and Savings: a Taxonomy 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. Classification-JEL: D11; D91; O12; O16 Keywords: Theory Consumer Economics; Intertemporal Consumer Choice; Microeconomic Analyses of Economic Development; Economic Development; Financial Markets; Saving and Capital Investment; Corporate Finance and Governance File-Url: http://papers.tinbergen.nl/08071.pdf File-Format: application/pdf File-Size: 220978 bytes Handle: RePEc:tin:wpaper:20080071