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American Economic Review: Vol. 104 No. 3 (March 2014)


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Risk and Precautionary Saving in Two-Person Households

Article Citation

Apps, Patricia, Yuri Andrienko, and Ray Rees. 2014. "Risk and Precautionary Saving in Two-Person Households." American Economic Review, 104(3): 1040-46.

DOI: 10.1257/aer.104.3.1040


The existing literature on precautionary saving is based almost entirely on the assumption that the household acts as if it consisted of a single individual decision-taker. In reality saving decisions are typically taken by two-person households. This paper examines the implications of this observation for the existence of precautionary saving, and shows that the assumption that the individual utility functions satisfy the conditions for precautionary saving to exist can imply that the household exhibits precautionary saving, but only under strong assumptions on the type of risk change being considered.

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Apps, Patricia (U Sydney)
Andrienko, Yuri (U Sydney)
Rees, Ray (Ludwig Maximilian U Munich)

JEL Classifications

D14: Household Saving; Personal Finance
D81: Criteria for Decision-Making under Risk and Uncertainty

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