What do happiness and health satisfaction data tell us about relative risk aversion?

Nestor Gandelman and Ruben Hernandez-Murillo

No 2011-039, Working Papers from Federal Reserve Bank of St. Louis

Abstract: In this paper we provide estimates of the coefficient of relative risk aversion using information on self-reports of subjective personal well-being from the 2006 Gallup World Poll. We expand the existing literature on the use of happiness data to analyze economic issues by considering the implications of allowing for health state dependence in the utility function. Our estimates of relative risk aversion using pooled data from various country groupings are smaller than one, suggesting less concavity than log utility. We also find that controlling for health dependence generally reduces these estimates. Our results also suggest that the marginal utility of income increases when health deteriorates.

Keywords: Happiness; Health; Risk-taking (Psychology) (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cbe and nep-hea
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Journal Article: What do happiness and health satisfaction data tell us about relative risk aversion? (2013)
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