On the conditions for precautionary saving

This paper shows that if the signs of the first three derivatives of the ut ility function are assumed to be invariant in the consumption level, then n onsatiation and risk aversion are sufficient conditions for the presence of precautionary saving. Moreover, a similar set of assumptions ensures that the necessary conditions for decreasing absolute risk aversion and for decr easing absolute prudence are automatically satisfied. (C) 2001 Academic Pre ss.