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Risk Aversion and the Elasticity of Intertemporal Substitution among Australian Households

Freestone, Owen; Breunig, Robert

Description

This paper explores the degree of risk aversion amonsg Australian households using panel data from the Household Income and Labour Dynamics in Australia (HILDA) Survey. Using households' share of risky assets, we test whether relative risk aversion is constant in wealth. After accounting for measurement error, we cannot reject the constant relative risk aversion (CRRA) assumption. Using a CRRA utility function, we estimate the elasticity of intertemporal substitution and infer a coefficient of...[Show more]

dc.contributor.authorFreestone, Owen
dc.contributor.authorBreunig, Robert
dc.date.accessioned2022-04-22T01:44:07Z
dc.identifier.issn0013-0249
dc.identifier.urihttp://hdl.handle.net/1885/264054
dc.description.abstractThis paper explores the degree of risk aversion amonsg Australian households using panel data from the Household Income and Labour Dynamics in Australia (HILDA) Survey. Using households' share of risky assets, we test whether relative risk aversion is constant in wealth. After accounting for measurement error, we cannot reject the constant relative risk aversion (CRRA) assumption. Using a CRRA utility function, we estimate the elasticity of intertemporal substitution and infer a coefficient of relative risk aversion of 1.2 to 1.4. These findings can provide guidance for calibrating household preferences in macroeconomic models of the Australian economy.
dc.format.mimetypeapplication/pdf
dc.language.isoen_AU
dc.publisherBlackwell Publishing Ltd
dc.rights© 2020 Economic Society of Australia
dc.sourceEconomic Record
dc.titleRisk Aversion and the Elasticity of Intertemporal Substitution among Australian Households
dc.typeJournal article
local.description.notesImported from ARIES
local.identifier.citationvolume96
dc.date.issued2020
local.identifier.absfor140200 - APPLIED ECONOMICS
local.identifier.ariespublicationa383154xPUB13131
local.publisher.urlhttps://www.wiley.com/en-gb
local.type.statusPublished Version
local.contributor.affiliationFreestone, Owen, College of Asia and the Pacific, ANU
local.contributor.affiliationBreunig, Robert, College of Asia and the Pacific, ANU
local.description.embargo2099-12-31
local.bibliographicCitation.issue313
local.bibliographicCitation.startpage121
local.bibliographicCitation.lastpage139
local.identifier.doi10.1111/1475-4932.12538
dc.date.updated2020-12-27T07:19:58Z
CollectionsANU Research Publications

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