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Risk Aversion at the Country Level

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  • Gandelman, Nestor

    (Universidad ORT Uruguay)

  • Hernandez-Murillo, Ruben

    (Federal Reserve Bank of St. Louis)

Abstract

In this paper we provide estimates of the coefficient of relative risk aversion for 80 countries using data on self-reports of personal well-being from the Gallup World Poll. For most countries we cannot reject the null hypothesis that the coefficient of relative risk aversion equals 1. We conclude that our result supports the use of the log utility function in numerical simulations.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2014-5.

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Length: 11 pages
Date of creation: 01 Feb 2014
Date of revision:
Handle: RePEc:fip:fedlwp:2014-005

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  1. Leonardo Gasparini & Pablo Gluzmann, 2009. "Estimating income poverty and inequality from the Gallup World Poll. The case of Latin America and the Caribbean," Working Papers 151, ECINEQ, Society for the Study of Economic Inequality.
  2. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  3. Néstor Gandelman & Rafael Porzecanski, 2013. "Happiness Inequality: How Much is Reasonable?," Social Indicators Research, Springer, vol. 110(1), pages 257-269, January.
  4. Gordon, Stephen & St-Amour, Pascal, 2003. "Asset Returns and State-Dependent Risk Preferences," Cahiers de recherche 0316, CIRPEE.
  5. N. Gregory Mankiw, 1983. "Consumer Durables and the Real Interest Rate," NBER Working Papers 1148, National Bureau of Economic Research, Inc.
  6. Arie Kapteyn & Federica Teppa, 2009. "Subjective Measures of Risk Aversion, Fixed Costs, and Portfolio Choice," DNB Working Papers 216, Netherlands Central Bank, Research Department.
  7. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-65, April.
  8. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
  9. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December.
  10. Szpiro, George G. & Outreville, Jean-Francois, 1988. "Relative risk aversion around the world : Further results," Journal of Banking & Finance, Elsevier, vol. 6(1, Supple), pages 127-128, January.
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