theoretical predictions, we find that an increase in income risk is associated with higher savings for loss-averse individuals … uncertainty about future income triggers saving because of loss aversion. We extend their theoretical analysis to also consider … the internal margin, i.e., the strength, of loss aversion, and empirically study the relation between income risk …

empirically study the relation between income risk, experimentally elicited loss aversion, and precautionary savings. We do so …This paper empirically examines the behavioral precautionary saving hypothesis that uncertainty about future income … subject to substantial income risk. In line with the theoretical predictions, we find that an increase in income risk is …