EconStor >
Stockholm School of Economics >
EFI - The Economic Research Institute, Stockholm School of Economics >
SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/56377
  
Title:Aggregate savings when individual income varies PDF Logo
Authors:Flodén, Martin
Issue Date:2005
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 591
Abstract:This paper examines aggregate savings in a general equilibrium model where infinitely lived households face volatile (and possibly uncertain) income paths, hold a risk-free asset, and face a liquidity constraint. I first show that the equilibrium capital stock in an economy without uncertainty, but where individual income varies, can be larger than in an economy where each household's income is constant. When income is stochastic, the equilibrium capital stock is always larger than when income is constant. This additional capital accumulation has sometimes been interpreted as precautionary savings, but I demonstrate that it is mostly generated by permanent-income motives.
Subjects:equilibrium interest rate
aggregate savings
precautionary saving
infinite horizon
general equilibrium
JEL:D52
D91
E21
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

Files in This Item:
File Description SizeFormat
482800755.pdf226.2 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/56377

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.