The marginal propensity to consume and multidimensional risk

Elyès Jouini; Clotilde Napp; Diego Nocetti

doi:10.1016/j.econlet.2013.02.002

The marginal propensity to consume and multidimensional risk

Elyès Jouini
, Clotilde Napp
, Diego Nocetti

Université Paris Dauphine
Clarkson University

Research output: Contribution to journal › Article › peer-review

Abstract

Kimball (1990a,b) established that income risk increases the marginal propensity to consume if and only if absolute prudence decreases. We characterize decreasing and increasing multivariate prudence and show that a multidimensional risk increases the marginal propensity to consume if and only if absolute prudence decreases with wealth, in the sense that its derivative is negative-definite.

Original language	English
Pages (from-to)	124-127
Number of pages	4
Journal	Economics Letters
Volume	119
Issue number	2
DOIs	https://doi.org/10.1016/j.econlet.2013.02.002
State	Published - May 2013
Externally published	Yes

Keywords

Marginal propensity to consume
Multivariate risk
Prudence

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10.1016/j.econlet.2013.02.002

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title = "The marginal propensity to consume and multidimensional risk",

abstract = "Kimball (1990a,b) established that income risk increases the marginal propensity to consume if and only if absolute prudence decreases. We characterize decreasing and increasing multivariate prudence and show that a multidimensional risk increases the marginal propensity to consume if and only if absolute prudence decreases with wealth, in the sense that its derivative is negative-definite.",

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AU - Napp, Clotilde

AU - Nocetti, Diego

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AB - Kimball (1990a,b) established that income risk increases the marginal propensity to consume if and only if absolute prudence decreases. We characterize decreasing and increasing multivariate prudence and show that a multidimensional risk increases the marginal propensity to consume if and only if absolute prudence decreases with wealth, in the sense that its derivative is negative-definite.

KW - Marginal propensity to consume

KW - Multivariate risk

KW - Prudence

UR - https://www.scopus.com/pages/publications/84874798052

U2 - 10.1016/j.econlet.2013.02.002

DO - 10.1016/j.econlet.2013.02.002

M3 - Article

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VL - 119

SP - 124

EP - 127

JO - Economics Letters

JF - Economics Letters

IS - 2

ER -

The marginal propensity to consume and multidimensional risk

Abstract

Keywords

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