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Childhood Determinants of Risk Aversion: The Long Shadow of Compulsory Education

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Author Info

  • Hryshko, Dmytro

    ()
    (University of Alberta, Department of Economics)

  • Luengo-Prado, Maria Jose

    ()
    (Northeastern University)

  • Sorensen, Bent

    ()
    (University of Houston)

Abstract

We study the determinants of individual attitudes towards risk and,in particular,why some individuals exhibit extremely high risk aversion. Using data from the Panel Study of Income Dynamics we find that policy induced increases in high school graduation rates lead to significantly fewer individuals being highly risk averse in the next generation. Other significant determinants of risk aversion are age, sex, and parents' risk aversion. We verify that risk aversion matters for economic behavior in that it predicts individuals' volatility of income.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2011-2.

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Length: 51 pages
Date of creation: 01 Jan 2011
Date of revision:
Handle: RePEc:ris:albaec:2011_002

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Keywords: schooling reforms; risk attitudes; intergenerational persistence;

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References

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  1. John M. Abowd & David Card, 1986. "On the Covariance Structure of Earnings and Hours Changes," NBER Working Papers 1832, National Bureau of Economic Research, Inc.
  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.
  3. Claudia Goldin & Lawrence Katz, 2003. "Mass Secondary Schooling and the State," NBER Working Papers 10075, National Bureau of Economic Research, Inc.
  4. Ann Huff Stevens & Marianne Page & Philip Oreopoulos, 2005. "The Intergenerational Effects of Compulsory Schooling," Working Papers 519, University of California, Davis, Department of Economics.
  5. Monica Paiella & Luigi Guiso, 2004. "The Role of Risk Aversion in Predicting Individual Behaviour," Econometric Society 2004 Latin American Meetings 222, Econometric Society.
  6. Daniel J. Benjamin & Sebastian A. Brown & Jesse M. Shapiro, 2006. "Who is “Behavioral”? Cognitive Ability and Anomalous Preferences," Levine's Working Paper Archive 122247000000001334, David K. Levine.
  7. Guiso, Luigi & Pistaferri, Luigi & Schivardi, Fabiano, 2001. "Insurance Within the Firm," CEPR Discussion Papers 2793, C.E.P.R. Discussion Papers.
  8. Mark Kazarosian, 1997. "Precautionary Savings-A Panel Study," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 241-247, May.
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Citations

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Cited by:
  1. Daiji Kawaguchi, 2013. "Fewer School Days, More Inequality," Global COE Hi-Stat Discussion Paper Series gd12-271, Institute of Economic Research, Hitotsubashi University.
  2. Sérgio Almeida De Sousa & Marcos De Almeida Rangel, 2014. "Do As I Do, Not As I Say: Incentivization And The Relationship Between Cognitive Ability And Riskaversion," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 126, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  3. Olaf Hübler, 2012. "Are Tall People Less Risk Averse than Others?," SOEPpapers on Multidisciplinary Panel Data Research 457, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. 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.
  5. Deck, Cary & Lee, Jungmin & Reyes, Javier A. & Rosen, Christopher C., 2013. "A failed attempt to explain within subject variation in risk taking behavior using domain specific risk attitudes," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 1-24.
  6. Seeun Jung, 2014. "Does Education Affect Risk Aversion?: Evidence from the 1973 British Education Reform," PSE Working Papers halshs-00967229, HAL.
  7. ITO Takahiro & KUBOTA Kohei & OHTAKE Fumio, 2014. "The Hidden Curriculum and Social Preferences," Discussion papers 14024, Research Institute of Economy, Trade and Industry (RIETI).
  8. Christelis, Dimitris & Dobrescu, Loretti I. & Motta, Alberto, 2011. "Early life conditions and financial risk-taking in older age," CFS Working Paper Series 2011/28, Center for Financial Studies (CFS).
  9. Leuermann, Andrea & Necker, Sarah, 2011. "Intergenerational transmission of risk attitudes: A revealed preference approach," Freiburg Discussion Papers on Constitutional Economics 11/4, Walter Eucken Institut e.V..
  10. Andrea Leuermann & Sarah Necker, 2011. "Intergenerational Transmission of Risk Attitudes: A Revealed Preference Approach," SOEPpapers on Multidisciplinary Panel Data Research 412, DIW Berlin, The German Socio-Economic Panel (SOEP).
  11. Santi Budria & Luis Diaz-Serrano & Ada Ferrer-i-Carbonell & Joop Hartog, 2013. "Risk attitude and wage growth: replicating Shaw (1996)," Empirical Economics, Springer, vol. 44(2), pages 981-1004, April.
  12. Darragh Flannery & Cathal O’Donoghue, 2011. "The Life-cycle Impact of Alternative Higher Education Finance Systems in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 42(3), pages 237–270.
  13. Howard, Gregory E. & Roe, Brian E., 2011. "Comparing the Risk Attitudes of U.S. and German Farmers," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114528, European Association of Agricultural Economists.
  14. Necker, Sarah & Voskort, Andrea, 2014. "Intergenerational transmission of risk attitudes – A revealed preference approach," European Economic Review, Elsevier, vol. 65(C), pages 66-89.
  15. Alberto Bisin & Thierry Verdier, 2010. "The Economics of Cultural Transmission and Socialization," NBER Working Papers 16512, National Bureau of Economic Research, Inc.

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