Precautionary wealth accumulation: A positive third derivative is not enough (Q1608825)
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| Language | Label | Description | Also known as |
|---|---|---|---|
| English | Precautionary wealth accumulation: A positive third derivative is not enough |
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Precautionary wealth accumulation: A positive third derivative is not enough (English)
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13 August 2002
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It is commonly conjectured that expected wealth accumulation increases when earnings risk increases as long as the utility function in each period is increasing, concave and has a positive third derivative. We present a counter example which highlights the importance of the convexity of the savings function.
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precautionary wealth
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earnings risk
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savings function
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