Risk and Time Preferences Among the Urban Poor in Saudi Arabia

This paper investigates behavioral attitudes toward risk and time among the urban poor in Saudi Arabia by conducting an incentivized lab‐in‐the‐field experiment and exploring the correlations between these attitudes and demographic and socioeconomic characteristics that are relevant in the Saudi context. Specifically, the focus of this research is on cultural and religious indicators related to Bedouin heritage and the strength of religious beliefs as well as a set of different proxies for poverty, including income, assets, social welfare payments, and social capital. Accordingly, we define a discounted utility model, where we apply prospect theory and quasihyperbolic discounting. We then jointly estimate participants' risk and time preferences via a maximum likelihood approach. Our results suggest that, on average, poor urban Saudis exhibit high levels of risk aversion and patience; these findings are similar to those reported in other studies that have investigated Muslim respondents in rural settings. We also reveal that stronger religious beliefs are associated with higher levels of risk‐taking and a stronger preference for the present, whereas Bedouin heritage and asset‐related poverty in terms of home ownership and savings are related to higher levels of risk aversion and impatience.