Heterogeneity in risk attitudes, if not properly accounted for, may induce a bias on the income coefficient of standard consumption insurance regressions. We show that, extending the theoretical analysis and empirical findings in Schulofer-Wohl (2011), the sign of the bias is ambiguous, and depends on cycle-related variables and on the covariances of both aggregate and idiosyncratic risk with individual risk aversion.
Heterogeneity in Risk Aversion and Risk Sharing Regressions
Simone Tedeschi;
2019-01-01
Abstract
Heterogeneity in risk attitudes, if not properly accounted for, may induce a bias on the income coefficient of standard consumption insurance regressions. We show that, extending the theoretical analysis and empirical findings in Schulofer-Wohl (2011), the sign of the bias is ambiguous, and depends on cycle-related variables and on the covariances of both aggregate and idiosyncratic risk with individual risk aversion.File in questo prodotto:
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ATV2019-Journal_of_Applied_Econometrics_.pdf
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