Expectations and riskiness of future earnings are crucial determinants of individuals' intertemporal choices. Yet, the empirical literature lacks reliable measures of the distribution of future income. Lacking direct observability, the latter is usually estimated inferring the mean, the variance...

We use household survey data to construct a direct measure of absolute risk aversion based on the maximum price a consumer is willing to pay to enter a lottery. We relate this measure to consumers' endowment and attributes and to measures of background risk. We find that risk aversion is a...

We propose a new approach to identify the strength of the precautionary motive and the extent of self-insurance in response to earnings risk based on Euler equation estimates. To address endogeneity problems, we use Norwegian administrative data and instrument consumption and earnings volatility...