Necessity of hyperbolic absolute risk aversion for the concavity of consumption functions

Alexis Akira Toda

Journal of Mathematical Economics, 2021, vol. 94, issue C

Abstract: Carroll and Kimball (1996) have shown that, in the class of utility functions that are strictly increasing, strictly concave, and have nonnegative third derivatives, hyperbolic absolute risk aversion (HARA) is sufficient for the concavity of consumption functions in general consumption-saving problems. This paper shows that HARA is necessary, implying the concavity of consumption is not a robust prediction outside the HARA class.

Keywords: Concavity; Consumption function; Hyperbolic absolute risk aversion; Robust predictions (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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Working Paper: Necessity of Hyperbolic Absolute Risk Aversion for the Concavity of Consumption Functions (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:94:y:2021:i:c:s0304406820301373

DOI: 10.1016/j.jmateco.2020.102460

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