We consider a formal approach to comparative risk aversion and applies it to intertemporal choice models. This allows us to ask whether standard classes of utility functions, such as those inspired by Kihlstrom and Mirman (1974), Selden (1978), Epstein and Zin (1989) and Quiggin (1982) are well-ordered in terms of risk aversion. Moreover, opting for this model-free approach allows us to establish new general results on the impact of risk aversion on savings behaviors. In particular, we show that risk aversion enhances precautionary savings, clarifying the link that exists between the notions of prudence and risk aversion.
risk aversion; savings behaviors; precautionary savings;
- D11: Consumer Economics: Theory
- D81: Criteria for Decision-Making under Risk and Uncertainty
- D91: Intertemporal Household Choice • Life Cycle Models and Saving
TSE Working Paper, n. 10-141, January 28, 2010