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Risk Preferences in the PSID: Individual Imputations and Family Covariation

Author

Listed:
  • Miles S. Kimball
  • Claudia R. Sahm
  • Matthew D. Shapiro

Abstract

Survey measures of preference parameters provide a means for accounting for otherwise unobserved heterogeneity.This paper presents measures of relative risk tolerance based on responses to survey questions about hypothetical gambles over lifetime income.It discusses how to impute estimates of utility function parameters from the survey responses using a statistical model that accounts for survey response error. There is substantial heterogeneity in true preference parameters even after survey response error is taken into account.The paper discusses how to use the preference parameters imputed from the survey responses in regression models as a control for differences in preferences across individuals. This paper focuses on imputations for respondents in the Panel Study of Income Dynamics (PSID).It also studies the covariation of risk preferences among members of households.It finds fairly strong covariation in attitudes about risk -- between parents and children and especially between siblings and between spouses.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Miles S. Kimball & Claudia R. Sahm & Matthew D. Shapiro, 2009. "Risk Preferences in the PSID: Individual Imputations and Family Covariation," American Economic Review, American Economic Association, vol. 99(2), pages 363-368, May.
    • Handle: RePEc:aea:aecrev:v:99:y:2009:i:2:p:363-68
    Note: DOI: 10.1257/aer.99.2.363
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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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    1. Risk Preferences in the PSID: Individual Imputations and Family Covariation (AER 2009) in ReplicationWiki

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