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When winter is over, its cold remains: Early-life famine experience breeds risk aversion

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  • Chen, Xiangpo
  • Hu, Xinyan
  • Xu, Jinhai

Abstract

Risk preferences are a fundamental element of economic decision-making, and major trauma influences individuals' feelings and attitudes towards risk. This study examines the long-term effects of the 1959–1961 Great Chinese Famine on risk aversion, combining (i) a field survey covering 2400 families in 2016 and (ii) demographic statistics from precisely documented official records covering six counties over the 1956–1964 period. We find that early-life famine exposure during childhood and adolescence significantly attenuated individuals' risk preferences in adulthood. Further evidence on spillovers in risk preferences through intergenerational transmission and interpersonal interaction channels explains the persistence of famine-related risk aversion. Moreover, China's kinship system and market exposure help to mitigate the negative impact of the famine.

Suggested Citation

  • Chen, Xiangpo & Hu, Xinyan & Xu, Jinhai, 2023. "When winter is over, its cold remains: Early-life famine experience breeds risk aversion," Economic Modelling, Elsevier, vol. 123(C).
    • Handle: RePEc:eee:ecmode:v:123:y:2023:i:c:s0264999323001013
    DOI: 10.1016/j.econmod.2023.106289
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    1. Kunyang Zhang & Yi Luo & Yan Han, 2023. "The Long-Term Impact of Famine Experience on Harvest Losses," Agriculture, MDPI, vol. 13(6), pages 1-18, May.

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    More about this item

    Keywords

    Early-life trauma; Famine; Risk preferences; Childhood and adolescence;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East

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