Up Next

ki-logo-white
Market-Based Solutions to Vital Economic Issues

SEARCH

ki-logo-white
Market-Based Solutions to Vital Economic Issues
Research
Nov 12, 2013

Welfare Costs in the Long Run

Abstract

This study provides general methods to measure and characterize the welfare costs of long-run consumption uncertainty with Epstein and Zin (1989) preferences. I find that long-run uncertainty can create significant welfare costs even when risk aversion is moderate and the short-run consumption volatility low. These findings are relevant for the assessment of policies that require a trade-off between short- and long-run stabilization.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


View Working Paper

You may also be interested in: