Citation

Kaplow L. J. Risk Uncertain. 2005; 31(1): 23-34.

Copyright

(Copyright © 2005, Holtzbrinck Springer Nature Publishing Group)

DOI

10.1007/s11166-005-2928-1

PMID

unavailable

Abstract

Individuals' risk preferences are estimated and employed in a variety of settings, notably including choices in financial, labor, and product markets. Recent work, especially in financial economics, provides estimates of individuals' coefficients of relative risk aversion ( R's ) in excess of one, and often significantly higher. However, it can be shown that high R's imply equally high values for the income elasticity of the value of a statistical life. Yet estimates of this elasticity, derived from labor and product markets, are in the range of 0.5 to 0.6. Furthermore, it turns out that even an R below one is difficult to reconcile with these elasticity estimates. Thus, there appears to be an important (additional) anomaly involving individuals' risk-taking behavior in different market settings.