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The theory of precautionary saving: an overview of recent developments

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  • Donatella Baiardi

    (University of Parma)

  • Marco Magnani

    (University of Parma)

  • Mario Menegatti

    (University of Parma)

Abstract

This work reviews recent developments in the literature analyzing precautionary saving. After a description of traditional precautionary saving theory, which considers labor income risk and interest rate risk, we present different research lines which introduce a wide range of extensions and generalizations of the classical model: the contemporaneous presence of multiple risks, changes in risks of different types, multiple variables affecting household utility, preferences non-featuring risk aversion and joint decisions on many choice variables. For each of these issues, we provide specific highlights which summarize the main results obtained in the literature. Lastly, we briefly discuss the analyzes beyond the classical model.

Suggested Citation

  • Donatella Baiardi & Marco Magnani & Mario Menegatti, 2020. "The theory of precautionary saving: an overview of recent developments," Review of Economics of the Household, Springer, vol. 18(2), pages 513-542, June.
    • Handle: RePEc:kap:reveho:v:18:y:2020:i:2:d:10.1007_s11150-019-09460-3
    DOI: 10.1007/s11150-019-09460-3
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    23. Eduardo de Sá Fortes Leitão Rodrigues, 2025. "Financial Literacy and Saving Decisions: A Cross-Sectional Analysis Using GSEM Approach," Working Papers REM 2025/0362, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
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    19. Desu Liu & Mario Menegatti, 2019. "Optimal saving and health prevention," Journal of Economics, Springer, vol. 128(2), pages 177-191, October.
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