Abstract
In a recent article, Dionne and Eeckhoudt [1987] have shown that the concept of “proportional risk aversion” (presented in a 1984 paper by the same authors) is useful in studying the effect of increased wage rate uncertainty on labor supply either with or without taxation of labor income. One of the major conclusions of the analysis is precisely that “the effects under uncertainty critically depend upon the slope of the supply curve under certainty” (p. 354).
It will not make much sense to study decisions under uncertainty unless we assume that we know how to make decisions under full certainty.
—Karl Borch ([1968] p. 11)
Part of this research was done while Georges Dionne was visiting CORE and the Facultés Catholiques de Mons and while Louis Eeckhoudt and Eric Briys were visiting the Université de Montréal. Comments and encouragements on earlier drafts by S. Bucovetsky, J.H. Drèze, F. Gagnon, E. Karni, H.-E. Leland, D. Moffet, P. Perron, and A. Sandmo were extremely appreciated. The Social Sciences and Humanities Council of Canada gave financial support for this study.
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Dionne, G., Eeckhoudt, L., Briys, E. (1991). Proportional Risk Aversion and Saving Decisions under Uncertainty. In: Loubergé, H. (eds) Risk, Information and Insurance. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-2183-2_4
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DOI: https://doi.org/10.1007/978-94-009-2183-2_4
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