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Estimating Risk Attitudes in Denmark

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Author Info
E. Elisabet Rutstrom
Glenn W. Harrison
Morten I. Lau

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Abstract

We estimate individual risk attitudes using controlled experiments in the field in Denmark. These risk preferences are elicited by means of field experiments involving real monetary rewards. The experiments were carried out across Denmark using a representative sample of 253 people between 19 and 75 years of age. Risk attitudes are estimated for various individuals differentiated by socio-demographic characteristics such as income and age. Our results indicate that the average Dane is risk averse, and that risk neutrality is an inappropriate assumption to apply. We also find that risk attitudes do vary significantly with respect to several important socio-demographic variables. These conclusions are robust to the use of relatively flexible specifications of risk preferences. When individual characteristics of the sample are ignored, relative risk aversion appears not to be constant over the domain of income considered here, and rises rapidly as income increases above "small" amounts. However, relative risk aversion appears to be constant when one corrects for individual heterogeneity, although there is considerable uncertainty in the characterization of risk attitudes for low stakes

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Paper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 201.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:ausm04:201

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Keywords: Risk preferences; field experiments; heterogeneity;

Find related papers by JEL classification:
D00 - Microeconomics - - General - - - General

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References listed on IDEAS
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  1. Dohmen, Thomas J & Falk, Armin & Huffman, David & Sunde, Uwe, 2007. "Are Risk Aversion and Impatience Related to Cognitive Ability?," CEPR Discussion Papers 6398, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Dohmen, Thomas J & Falk, Armin & Huffman, David & Schupp, Jürgen & Sunde, Uwe & Wagner, Gert Georg, 2006. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," CEPR Discussion Papers 5517, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Anderberg, Dan & Chevalier, Arnaud & Wadsworth, Jonathan, 2008. "Anatomy of a Health Scare: Education, Income and the MMR Controversy in the UK," IZA Discussion Papers 3590, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Holger Bonin & Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2006. "Cross-sectional Earnings Risk and Occupational Sorting: The Role of Risk Attitudes," IZA Discussion Papers 1930, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutstrom, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, vol. 95(3), pages 897-901, June. [Downloadable!]
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