This chapter discusses the basic equilibrium model called computable general equilibrium (CGE) model, and describes some of its use in policy analysis. The CGE-model accounts for the bulk of the application that imposes a number of restrictions, as it does not allow bounds on endogenous...

Risk may induce precautionary saving but it can also reduce saving. The theoretical literature recognizes both possibilities, but favors a positive effect (both for developed and developing countries); the empirical literature is divided, reporting (small) positive effects for developed...