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The marginal propensity to consume and multidimensional risk

Abstract : 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.
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Submitted on : Sunday, January 12, 2014 - 12:03:11 PM
Last modification on : Wednesday, November 17, 2021 - 12:27:09 PM
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Elyès Jouini, Clotilde Napp, Diego Nocetti. The marginal propensity to consume and multidimensional risk. Economics Letters, Elsevier, 2013, 119 (2), pp.124-127. ⟨halshs-00927262⟩

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