Necessity of Hyperbolic Absolute Risk Aversion for the Concavity of Consumption Functions
Theoretical Economics
2021-01-06 v2
Abstract
Carroll and Kimball (1996) have shown that, in the class of utility functions that are strictly increasing, strictly concave, and have nonnegative third derivatives, hyperbolic absolute risk aversion (HARA) is sufficient for the concavity of consumption functions in general consumption-saving problems. This paper shows that HARA is necessary, implying the concavity of consumption is not a robust prediction outside the HARA class.
Keywords
Cite
@article{arxiv.2009.13564,
title = {Necessity of Hyperbolic Absolute Risk Aversion for the Concavity of Consumption Functions},
author = {Alexis Akira Toda},
journal= {arXiv preprint arXiv:2009.13564},
year = {2021}
}