Risk Attitudes and Well-being in Latin America
AbstractA common premise in both the theoretical and policy literature on development is that people remain poor because they are too impatient to save and too risk averse to take the sort of chances needed to accumulate wealth. The empirical literature, however, suggests that this assumption is far from proven. We report on field experiments designed to address many of the problems confounding previous analyses of the links between risk preferences and well-being. Our sample includes more than 3,000 participants who were drawn representatively from six Latin American cities: Bogotá, Buenos Aries, Caracas, Lima, Montevideo, San José. In addition to the experiment which reveals interestingcross-country differences, participants completed an extensive survey that provides data on a variety of well-being indicators and a number of important controls. Focusing on risk preferences, we find little evidence of robust links between risk aversion and wellbeing. However, when we analyze the results of three treatments that add elements of reality to the decision problem, we see that these, more subtle, instruments correlate better with well-being, even after controlling for a variety of other important factors like the accumulation of human capital and access to credit.
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Bibliographic InfoPaper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 007718.
Date of creation: 22 Nov 2010
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risk aversion; ambiguity aversion; loss aversion; risk pooling; well-being; Latin America;
Other versions of this item:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-EXP-2010-12-11 (Experimental Economics)
- NEP-HAP-2010-12-11 (Economics of Happiness)
- NEP-LAM-2010-12-11 (Central & South America)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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