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Impact of Violent Crime on Risk Aversion: Evidence from the Mexican Drug War

Author

Listed:
  • Ryan Brown

    (University of Colorado Denver)

  • Verónica Montalva

    (Inter-American Development Bank)

  • Duncan Thomas

    (Duke University)

  • Andrea Velásquez

    (University of Colorado Denver)

Abstract

Whereas attitudes toward risk play an important role in many decisions over the life course, factors that affect those attitudes are not fully understood. Using longitudinal survey data collected in Mexico before and during the Mexican war on drugs, we investigate how risk attitudes change with variation in insecurity and uncertainty brought on by unprecedented changes in local-area violent crime. Exploiting the fact that the timing, virulence, and spatial distribution of changes in violent crime were unanticipated, we establish there is a rise in risk aversion spread across the entire local population as local-area violent crime increases.

Suggested Citation

  • Ryan Brown & Verónica Montalva & Duncan Thomas & Andrea Velásquez, 2019. "Impact of Violent Crime on Risk Aversion: Evidence from the Mexican Drug War," The Review of Economics and Statistics, MIT Press, vol. 101(5), pages 892-904, December.
    • Handle: RePEc:tpr:restat:v:101:y:2019:i:5:p:892-904
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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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