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Risk Preferences in the PSID: Individual Imputations and Family Covariation

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  • Miles S. Kimball
  • Claudia R. Sahm
  • Matthew D. Shapiro

Abstract

Survey measures of preference parameters provide a means for accounting for otherwise unobserved heterogeneity.This paper presents measures of relative risk tolerance based on responses to survey questions about hypothetical gambles over lifetime income.It discusses how to impute estimates of utility function parameters from the survey responses using a statistical model that accounts for survey response error. There is substantial heterogeneity in true preference parameters even after survey response error is taken into account.The paper discusses how to use the preference parameters imputed from the survey responses in regression models as a control for differences in preferences across individuals. This paper focuses on imputations for respondents in the Panel Study of Income Dynamics (PSID).It also studies the covariation of risk preferences among members of households.It finds fairly strong covariation in attitudes about risk -- between parents and children and especially between siblings and between spouses.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.99.2.363
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File URL: http://www.aeaweb.org/aer/data/may09/20090008_app.pdf
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 2 (May)
Pages: 363-68

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:2:p:363-68

Note: DOI: 10.1257/aer.99.2.363
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References

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  1. Miles S. Kimball & Matthew D. Shapiro, 2008. "Labor Supply: Are the Income and Substitution Effects Both Large or Both Small?," NBER Working Papers 14208, National Bureau of Economic Research, Inc.
  2. Dohmen, Thomas J & Falk, Armin & Huffman, David & Sunde, Uwe, 2008. "The Intergenerational Transmission of Risk and Trust Attitudes," CEPR Discussion Papers 6844, C.E.P.R. Discussion Papers.
  3. Kimball, Miles S & Sahm, Claudia R & Shapiro, Matthew D, 2008. "Imputing Risk Tolerance From Survey Responses," Journal of the American Statistical Association, American Statistical Association, vol. 103(483), pages 1028-1038.
  4. Ulrike Malmendier & Stefan Nagel, 2009. "Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?," NBER Working Papers 14813, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Dan Benjamin, Mark Fontana and I Design an In-Depth Risk Aversion Survey
    by ? in Confessions of a Supply-Side Liberal on 2013-03-01 08:01:36
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Cited by:
  1. Luc Arrondel & Nicolas Frémeaux, 2013. ""For richer, for poorer": savings preferences and choice of spouse," PSE Working Papers halshs-00786245, HAL.
  2. Mark Cullen & Liran Einav & Amy Finkelstein & Iuliana Pascu, 2010. "How General Are Risk Preferences? Choices Under Uncertainty in Different Domains," Discussion Papers 09-005, Stanford Institute for Economic Policy Research.
  3. Gopi Shah Goda & Colleen Flaherty Manchester, 2013. "Incorporating Employee Heterogeneity into Default Rules for Retirement Plan Selection," Journal of Human Resources, University of Wisconsin Press, vol. 48(1), pages 198-235.
  4. Marco Cozzi, 2013. "Risk Aversion Heterogeneity, Risky Jobs and Wealth Inequality," 2013 Meeting Papers 842, Society for Economic Dynamics.
  5. Gianluca Femminis, 2012. "Risk aversion heterogeneity and the investment-uncertainty relationship," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi itemq1260, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  6. Dror Brenner & Yona Rubinstein, 2012. "Pride and Prejudice: Using Ethnic-Sounding Names and Inter-Ethnic Marriages to Identify Labor Market Discrimination," CEP Discussion Papers dp1180, Centre for Economic Performance, LSE.
  7. Luc Arrondel & Nicolas Frémeaux, 2013. ""For richer, for poorer": savings preferences and choice of spouse," Working Papers halshs-00786245, HAL.
  8. Dror Brenner & Yona Rubinstein, 2012. "Pride and prejudice: using ethnic-sounding names and inter-ethnic marriages to identify labor market discrimination," LSE Research Online Documents on Economics 48932, London School of Economics and Political Science, LSE Library.
  9. Arrondel, Luc & Masson, André, 2011. "L'épargnant dans un monde en crise — Ce qui a changé," Opuscules du CEPREMAP, CEPREMAP, number 23, November.
  10. Liran Einav & Amy Finkelstein & Iuliana Pascu & Mark R. Cullen, 2012. "How General Are Risk Preferences? Choices under Uncertainty in Different Domains," American Economic Review, American Economic Association, vol. 102(6), pages 2606-38, October.
  11. Leuermann, Andrea & Necker, Sarah, 2011. "Intergenerational transmission of risk attitudes: A revealed preference approach," Freiburg Discussion Papers on Constitutional Economics 11/4, Walter Eucken Institut e.V..
  12. Necker, Sarah & Voskort, Andrea, 2014. "Intergenerational transmission of risk attitudes – A revealed preference approach," European Economic Review, Elsevier, vol. 65(C), pages 66-89.
  13. Brown, Sarah & Dietrich, Michael & Ortiz-Nuñez, Aurora & Taylor, Karl, 2011. "Self-employment and attitudes towards risk: Timing and unobserved heterogeneity," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 425-433, June.
  14. Liran Einav & Amy Finkelstein & Iuliana Pascu & Mark R. Cullen, 2010. "How general are risk preferences? Choices under uncertainty in different domains," NBER Working Papers 15686, National Bureau of Economic Research, Inc.
  15. Vieider, Ferdinand M. & Chmura, Thorsten & Martinsson, Peter, 2012. "Risk attitudes, development, and growth: Macroeconomic evidence from experiments in 30 countries," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2012-401, Social Science Research Center Berlin (WZB).
  16. Andrea Leuermann & Sarah Necker, 2011. "Intergenerational Transmission of Risk Attitudes: A Revealed Preference Approach," SOEPpapers on Multidisciplinary Panel Data Research 412, DIW Berlin, The German Socio-Economic Panel (SOEP).
  17. Luc Arrondel, 2013. "Are “daddy’s boys” just as rich as daddy? The transmission of values between generations," Journal of Economic Inequality, Springer, vol. 11(4), pages 439-471, December.

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