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Precautionary Saving in the Large under Higher-Order Risk and Recursive Utility

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  • Christoph Heinzel

Abstract

The measurement of the strength of the precautionary saving motive under recursive utility (RU) has been conceptually restricted to reactions to the addition of a zero-mean risk to safe future income. This paper provides characterizations of comparative precautionary saving under RU analogous to Ross' (1981) approach to comparative risk aversion for increases in risk, also of higher order, covering the two cases of income risk and a risky saving return. The characterizations involve a comparison based on precautionary premia. I also define preference-intensity measures of the Ross-type and show how they can equivalently represent comparative precautionary saving.

Suggested Citation

  • Christoph Heinzel, 2016. "Precautionary Saving in the Large under Higher-Order Risk and Recursive Utility," FOODSECURE Working papers 43, LEI Wageningen UR.
    • Handle: RePEc:fsc:fspubl:43
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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