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Traditional trust measurement and the risk confound: An experiment in rural Paraguay

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  • Schechter, Laura

Abstract

Play in the traditional trust experiment depends both on trust beliefs and on levels of risk aversion. We ran two experiments with a diverse set of subjects in fifteen villages of rural Paraguay, the traditional trust experiment and a new experiment measuring only risk aversion. We find that risk attitudes are highly predictive of play in the trust game. In addition, omitting risk aversion as a regressor in trust regressions signficiantly changes the coefficients of important explanatory variables such as gender and wealth. We also use data on income and bet choice to calculate players' coefficients of relative risk aversion.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 62 (2007)
Issue (Month): 2 (February)
Pages: 272-292

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Handle: RePEc:eee:jeborg:v:62:y:2007:i:2:p:272-292

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Web page: http://www.elsevier.com/locate/jebo

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References

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  11. Eckel, Catherine C. & Wilson, Rick K., 2004. "Is trust a risky decision?," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 447-465, December.
  12. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
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