On the stability of the constant relative risk aversion (CRRA) under high degrees of uncertainty

Niguez, Trino-Manuel and Paya, Ivan and Peel, David and Perote, Javier (2012) On the stability of the constant relative risk aversion (CRRA) under high degrees of uncertainty. Economics Letters, 115 (2). pp. 244-248. ISSN 0165-1765

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Abstract

Growth models under uncertainty and constant relative risk aversion (CRRA) utility are fragile in explaining consumers’ choice, as equilibrium consumption is dependent on distributional assumptions. We show that, under semi-nonparametric distributions, general equilibrium models are stable, as the existence of expected utility is guaranteed.