Finance and Economics Discussion Series

<p>Previous research suggests that in partial equilibrium individuals whose decision-making exhibits a present-bias--such as hyperbolic discounters who tend to over-consume--will be in favor of having a floor imposed on their savings. In this paper I show it is quite difficult for the introduction of a savings floor to be Pareto-improving in general equilibrium. Indeed a necessary condition for the floor to be Pareto-improving is that it is high enough to be binding for all individuals. Even in that case because the equilibrium interest rate is affected by the level of the savings floor some individuals may prefer to commit to a future time path of consumption by facing a high interest rate (and no floor) rather than a high floor.</p><p>This work has been selected by scholars as being culturally important and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact and remains as true to the original work as possible. Therefore you will see the original copyright references library stamps (as most of these works have been housed in our most important libraries around the world) and other notations in the work.</p><p>This work is in the public domain in the United States of America and possibly other nations. Within the United States you may freely copy and distribute this work as no entity (individual or corporate) has a copyright on the body of the work.</p><p>As a reproduction of a historical artifact this work may contain missing or blurred pages poor pictures errant marks etc. Scholars believe and we concur that this work is important enough to be preserved reproduced and made generally available to the public. We appreciate your support of the preservation process and thank you for being an important part of keeping this knowledge alive and relevant.</p>