Does government growth reduce precautionary saving?

Author: Hatzinikolaou D.

Source: Applied Economics, Volume 29, Number 4, 1 April 1997 , pp. 419-423(5)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

The paper extends the constant-relative-risk-aversion model by endogenizing the Arrow-Pratt coefficient of relative risk aversion. The empirical application treats this coefficient as a linear function of the rate of growth of real government expenditure per worker and estimates a Euler equation for consumption using Greek annual aggregate data for the period 1960-1993. The results support the view that government growth may cause a typical consumer to become less risk averse and save less.

Language: English

Document Type: Research article

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