Abstract
This 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.
| Original language | English |
|---|---|
| Pages (from-to) | 801-806 |
| Number of pages | 6 |
| Journal | Applied Economics Letters |
| Volume | 19 |
| Issue number | 9 |
| DOIs | |
| State | Published - Jun 2012 |
Keywords
- China
- Consumption fluctuations
- Risk averse
- Welfare cost
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