This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window
Open in New Tab
Open in same window
American Economic Review: Vol. 96 No. 5 (December 2006)
AER Volume. 96, Issue 5 | 
Previous ArticleNext Article
Sign up for Email Alerts Follow us on Twitter
AER Forthcoming Articles
Full-text Article
Previous ArticleNext Article
Expand
Quick Tools:
Print Article Summary Email Link to this Article Export CitationSign up for Email Alerts Follow us on Twitter
Explore:
AER Forthcoming Articles
A New Method of Estimating Risk Aversion
Article Citation
Chetty, Raj. 2006. "A New Method of Estimating Risk Aversion."
American Economic Review,
96(5): 1821-1834.
DOI: 10.1257/aer.96.5.1821
DOI: 10.1257/aer.96.5.1821
Abstract
I show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model. I derive a formula for the coefficient of relative risk aversion (γ) in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor. I bound the degree of complementarity using data on consumption choices when labor supply varies across states. Using labor supply elasticity estimates, I find a mean estimate of γ ≈ 1, then show generating γ > 2 requires that wage increases cause sharper labor supply reductions. (JEL D81 J22 )
Article Full-Text Access
Full-text Article
Authors
Chetty, Raj
