The marginal propensity to consume and multidimensional risk

Elyès Jouini (1) , Clotilde Napp (2) , Diego Nocetti (3)

1 CEREMADE - CEntre de REcherches en MAthématiques de la DEcision
2 DRM - Dauphine Recherches en Management
3 Clarkson University

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

Mots clés: Marginal propensity to consume; Multivariate risk; Prudence

Domaines: Economies et finances

Elyès Jouini, Clotilde Napp, Diego Nocetti. The marginal propensity to consume and multidimensional risk. Economics Letters, 2013, 119 (2), pp.124-127. ⟨halshs-00927262⟩