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Keywords:

  • D91;
  • E21;
  • J22
  • precautionary saving;
  • wage uncertainty;
  • labor supply;
  • multivariate risk aversion;
  • intertemporal substitution

We analyze precautionary saving behavior in a framework with labor and nonlabor income risks, an endogenous supply of labor, and a representation of preferences that disentangles attitudes toward risk, attitudes toward intertemporal substitution, and ordinal preferences for consumption and leisure. This preference structure allows us to disentangle and to describe in an intuitive way the different forces that determine precautionary saving “in the small” and “in the large.”