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Journal Article

What do happiness and health satisfaction data tell us about relative risk aversion?

Authors

Publication date

Dec 2013

Summary


In this paper we provide estimates of the coefficient of relative risk aversion using information on self-reports of subjective personal well-being from multiple datasets, including three cross-sectional surveys and two panel surveys, namely the Gallup World Poll, the European Social Survey, the World Values Survey, the British Household Panel Survey for the United Kingdom, and the General Social Survey for the United States. We additionally consider the implications of allowing for health-state dependence in the utility function on the estimates of risk aversion and examine how the marginal utility of income changes in poor health states. Our estimates of relative risk aversion with cross-section data vary closely around 1, which corresponds to logarithmic utility, while the estimates with panel data are slightly larger. We find that controlling for health dependence generally reduces these estimates. In contrast with other studies in the literature, our results also suggest that the marginal utility of income increases when satisfaction with health deteriorates, and this effect is robust across the various datasets analyzed. 2013 Elsevier B.V. All rights reserved.

Published in

Journal of Economic Psychology

Volume and page numbers

39 , 301 -312

DOI

http://dx.doi.org/10.1016/j.joep.2013.09.005

ISSN

16

Subjects

Psychology and Economics

Links

http://serlib0.essex.ac.uk/record=b1646364~S5

Notes

Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*

#522346


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