This paper undertakes a numerical analysis of the effects of changes in the tax rates on domestic and foreign capital income in a stochastically growing open economy under recursive preferences, in which the rate of time preference, epsilon, and the coefficient of risk aversion, R, can be set...

This paper studies attention allocation behavior of rationally inattentive consumers who have CRRA preferences, face uninsured capital income risk, and suffer from an information-processing capacity constraint. For given attention devoted to capital income risk, we solve for the optimal...

If agents in workhorse business cycle models with financial frictions are allowed to index contracts to observable aggregates, they share aggregate financial risk (almost) perfectly. Thus, the borrowing-constrained capital holders' wealth share does not collapse following adverse shocks and the...

Uncertainty has an almost negligible impact on project value in the economic standard model. I show that a comprehensive evaluation of uncertainty and uncertainty attitude changes this picture fundamentally. The analysis relies on the discount rate, which is the crucial determinant in balancing...

This paper distinguishes relative risk aversion and resistance to intertemporal substitution in climate risk modelling. Stochastic recursive preferences are introduced in a stylised numeric climate-economy model using preliminary IPPC 1998 scenarios. It shows that higher risk aversion increases...

This paper considers the extent to which the standard argument, that the disproportionate excess burden of taxation suggests the use of tax-smoothing in the face of future cost increases, is modified by uncertainty regarding the future. The role of uncertainty and risk aversion are examined...

Higher order risk preferences are important determinants of choices under uncertainty. After clarifying some terminological and methodological issues, we are able to confi rm, by using data collected by a questionnaire, the well established result of the preference of the majority of the...

Using the new macro data on risk aversion and patience by Falk et al. (2018), I show that risk aversion and patience are related to intelligence: high-IQ populations are more patient and more risk averse than low-IQ populations. The correlation between patience and intelligence corroborates...

We formalize the notion of monotonicity with respect to first-order stochastic dominance in the context of preferences defined over the set of temporal lotteries. It is shown that the only Kreps and Porteus (1978) preferences which are both stationary and monotone are Uzawa preferences and...

We formalize the notion of monotonicity with respect to first-order stochastic dominance in the context of preferences defined over the set of temporal lotteries. It is shown that the only Kreps and Porteus (1978) preferences which are both stationary and monotone are Uzawa preferences and...