期刊
JOURNAL OF ECONOMETRICS
卷 162, 期 1, 页码 25-34出版社
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jeconom.2009.10.006
关键词
Decreasing absolute risk aversion; Calibration; Diminishing marginal utility of wealth; Arrow-Pratt risk aversion
Arrow's hypotheses regarding the relationship between wealth and risk aversion measures have formed the basis for a large body of empirical research and theory. For example, many have suggested that decoupled farm subsidy payments may increase production as they decrease farmers' risk aversion. This paper develops a new calibration technique designed to measure the minimum change in concavity of a utility of wealth function necessary to describe a particular change in production behavior for some discrete change in wealth. I conclude that measurable changes in production levels should not be produced by changing levels of risk aversion except when wealth changes are a substantial portion of wealth. This tool draws into question the usefulness of Arrow's hypotheses in many current applications. (C) 2009 Elsevier B.V. All rights reserved.
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