Examining the role of risk aversion in calculating the welfare cost of consumption fluctuations
AbstractThis note examines the role of risk aversion in computing the welfare cost of consumption fluctuations under different utility and consumption process specifications. We find that the welfare cost of consumption fluctuations under a Constant-Relative-Risk-Aversion (CRRA) utility specification does not necessarily increase with the degree of relative risk aversion unless it fulfils certain conditions. The case of China is used as an illustration.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Economics Letters.
Volume (Year): 19 (2012)
Issue (Month): 9 (June)
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Web page: http://www.tandf.co.uk/journals/routledge/13504851.html
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