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Title:How changing prudence and risk aversion affect optimal saving PDF Logo
Authors:Bauer, Christian
Buchholz, Wolfgang
Issue Date:2008
Series/Report no.:CESifo working paper 2438
Abstract: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.
Subjects:Prudence
risk aversion
saving
intergenerational distribution
JEL:D11
D81
E21
H43
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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