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| Author: | Dolmas, J. |
| Title: | Risk preferences and the welfare cost of business cycles |
| Journal: | Review of Economic Dynamics
1998 : JUL, VOL. 1:3, p. 646-676 |
| Index terms: | ECONOMIC DYNAMICS RISK WELFARE |
| Language: | eng |
| Abstract: | This paper reexamines the "cost of business cycle" calculations made by Lucas and Improhoroglu under alternative specifications of individuals' risk preferences and using alternative specifications of the stochastic process for per capita consumption. The author finds that for a class of preferences used by Epstein and Zin, in an analysis of the equity premium puzzle, which display "first-order" risk aversion, the welfare cost of business cycles is potentially much larger than previous estimates. |
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