Does government growth reduce precautionary saving?
Author: Hatzinikolaou, Dimitris
Source: Applied Economics, Volume 29, Number 4, 1 April 1997 , pp. 419-423(5)
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.
Document Type: Research Article
Publication date: 1 April 1997