02099cam a22002537 4500001000600000003000500006005001700011008004100028100001700069245008300086260006600169490004100235500002000276520099900296530006101295538007201356538003601428690008801464690011201552710004201664830007601706856003701782856002601819w9988NBER20140725035235.0140725s2003 mau||||fs|||| 000 0 eng d1 aChetty, Raj.12aA New Method of Estimating Risk Aversionh[electronic resource] /cRaj Chetty. aCambridge, Mass.bNational Bureau of Economic Researchc2003.1 aNBER working paper seriesvno. w9988 aSeptember 2003.3 aThis paper develops a method of estimating the coefficient of relative risk aversion (g) from data on labor supply. The main result is that existing estimates of labor supply elasticities place a tight bound on g, without any assumptions beyond those of expected utility theory. It is shown that the curvature of the utility function is directly related to the ratio of the income elasticity of labor supply to the wage elasticity, holding fixed the degree of complementarity between consumption and leisure. The degree of complementarity can in turn be inferred from data on consumption choices when employment is stochastic. Using a large set of existing estimates of wage and income elasticities, I find a mean estimate of g = 1. I also give a calibration argument showing that a positive uncompensated wage elasticity, as found in most studies of labor supply, implies g < 1.25. The estimate of g changes by at most 0.25 over the range of plausible values for the complementarity parameter. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aD8 - Information, Knowledge, and Uncertainty2Journal of Economic Literature class. 7aG12 - Asset Pricing • Trading Volume • Bond Interest Rates2Journal of Economic Literature class.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w9988.4 uhttp://www.nber.org/papers/w9988 uurn:doi:10.3386/w9988