Modern economic theory summarizes the main characteristics of individual preferences through a definite set of parameters: risk aversion, prudence, and the elasticity of intertemporal substitution. Despite their importance, the results of the literature devoted to the parameters’ estimation are controversial. This paper highlights the neglected role that may have been played by the constraints that the quantitative definition of the parameters and the utility functions employed impose on the estimation. A number of simulation exercises are presented, which show that the same saving behaviour can be associated with quite different values of the parameters depending on the utility function adopted.

Pignalosa, D. (2019). On the role of the utility function in the estimation of preference parameters. METROECONOMICA [10.1111/meca.12256].

On the role of the utility function in the estimation of preference parameters

Pignalosa, Daria
2019-01-01

Abstract

Modern economic theory summarizes the main characteristics of individual preferences through a definite set of parameters: risk aversion, prudence, and the elasticity of intertemporal substitution. Despite their importance, the results of the literature devoted to the parameters’ estimation are controversial. This paper highlights the neglected role that may have been played by the constraints that the quantitative definition of the parameters and the utility functions employed impose on the estimation. A number of simulation exercises are presented, which show that the same saving behaviour can be associated with quite different values of the parameters depending on the utility function adopted.
2019
Pignalosa, D. (2019). On the role of the utility function in the estimation of preference parameters. METROECONOMICA [10.1111/meca.12256].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11590/353785
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