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On the Sources of Risk Preferences in Rural Vietnam

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  • Anh Duc Dang

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Abstract

In this paper, I provide new empirical evidence that the natural environment can shape individual risk preferences. By combining historical data on weather variation and contemporary survey questions on risk aversion, I find that risk aversion is significantly different for people who live in areas that have suffered high frequency of natural disasters. In particular, households highly affected by weather volatility show a longterm risk aversion and are more willing to buy insurance to protect crop losses. The finding also supports the hypothesis that when people are used to live in a risky environment, an incremental increase in risk affects their risk preferences less.

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Bibliographic Info

Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2012-593.

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Length: 57 Pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:acb:cbeeco:2012-593

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  1. Halliday, Timothy, 2006. "Migration, Risk, and Liquidity Constraints in El Salvador," Economic Development and Cultural Change, University of Chicago Press, vol. 54(4), pages 893-925, July.
  2. Durante, Ruben, 2009. "Risk, Cooperation and the Economic Origins of Social Trust: an Empirical Investigation," MPRA Paper 25887, University Library of Munich, Germany.
  3. van den Berg, Marrit & Fort, Ricardo & Burger, Kees, 2009. "Natural Hazards And Risk Aversion: Experimental Evidence From Latin America," 2009 Conference, August 16-22, 2009, Beijing, China, International Association of Agricultural Economists 51394, International Association of Agricultural Economists.
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  5. Sachiko Miyata, 2003. "Household's risk attitudes in Indonesian villages," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(5), pages 573-583.
  6. Booij, Adam S. & van de Kuilen, Gijs, 2009. "A parameter-free analysis of the utility of money for the general population under prospect theory," Journal of Economic Psychology, Elsevier, Elsevier, vol. 30(4), pages 651-666, August.
  7. Yamauchi, Futoshi & Yohannes, Yisehac & Quisumbing, Agnes R., 2009. "Natural disasters, self-Insurance, and human capital investment: Evidence from Bangladesh, Ethiopia, and Malawi," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 881, International Food Policy Research Institute (IFPRI).
  8. Baez, Javier E. & de la Fuente, Alejandro & Santos, Indhira, 2010. "Do Natural Disasters Affect Human Capital? An Assessment Based on Existing Empirical Evidence," IZA Discussion Papers 5164, Institute for the Study of Labor (IZA).
  9. Finlay, Jocelyn E., 2009. "Fertility response to natural disasters : the case of three high mortality earthquakes," Policy Research Working Paper Series 4883, The World Bank.
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  11. Eckel, Catherine C. & Grossman, Philip J., 2008. "Differences in the Economic Decisions of Men and Women: Experimental Evidence," Handbook of Experimental Economics Results, Elsevier, Elsevier.
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  13. Ilan Noy, 2007. "The Macroeconomic Consequences of Disasters," Working Papers, University of Hawaii at Manoa, Department of Economics 200707, University of Hawaii at Manoa, Department of Economics.
  14. Quang Nguyen, 2011. "Does nurture matter: Theory and experimental investigation on the effect of working environment on risk and time preferences," Journal of Risk and Uncertainty, Springer, Springer, vol. 43(3), pages 245-270, December.
  15. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 48(1), pages 29-36, May.
  16. Carol Newman & Fiona Wainwright, 2011. "Income Shocks and Household Risk-Coping Strategies: Evidence from Rural Vietnam," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp358, IIIS.
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Cited by:
  1. Sanjaya, Muhammad Ryan, 2013. "On the source of risk aversion in Indonesia using micro data 2007," Economics Discussion Papers 2013-33, Kiel Institute for the World Economy.

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