Risk attitudes and economic well-being in Latin America
A common conjecture in both the theoretical and policy literatures on development is that people remain poor because they are too impatient and risk averse to accumulate the resources needed to improve their well-being. The empirical literature, however, suggests that this conjecture is far from proven. We sample more than 3000 participants drawn representatively from six Latin American cities and find little correlation between baseline risk aversion and well-being, measured as an index of eight outcomes. We do, however, find that measures of ambiguity aversion, loss aversion and the willingness to take advantage of a risk pooling scheme all correlate with well-being. Participants who are ambiguity averse, loss averse, and who react conservatively in the risk pooling condition all have significantly lower scores on our well-being index. These results are robust to the inclusion of a variety of important controls like human capital accumulation and access to credit.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence From a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 635-672.
- Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-74, June.
- Joseph Henrich, 2001.
"In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies,"
American Economic Review,
American Economic Association, vol. 91(2), pages 73-78, May.
- Ernst Fehr & Joseph Henrich & Robert Boyd, 2003. "In Search of Homo Economicus: Behavioral Experiments in 15 Small- Scale Societies," Microeconomics 0305009, EconWPA.
- Camerer, Colin F. & Hogarth, Robin M., 1999.
"The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework,"
1059, California Institute of Technology, Division of the Humanities and Social Sciences.
- Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 7-42, December.
- Donkers, A.C.D. & Melenberg, B. & van Soest, A.H.O., 1999.
"Estimating Risk Attitudes Using Lotteries; A Large Sample Approach,"
1999-12, Tilburg University, Center for Economic Research.
- Donkers, Bas & Melenberg, Bertrand & Van Soest, Arthur, 2001. "Estimating Risk Attitudes Using Lotteries: A Large Sample Approach," Journal of Risk and Uncertainty, Springer, vol. 22(2), pages 165-95, March.
- Holzmann, Robert & Jorgensen, Steen, 1999.
"Social protection as social risk management : conceptual underpinnings for the social protection sector strategy paper,"
Social Protection and Labor Policy and Technical Notes
20119, The World Bank.
- Paul Mosley & Robert Holzmann & Steen Jorgensen, 1999. "Social protection as social risk management: conceptual underpinnings for the social protection sector strategy paper," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(7), pages 1005-1027.
- Sujoy Mukerji & Peter Klibanoff, 2002.
"A Smooth Model of Decision,Making Under Ambiguity,"
Economics Series Working Papers
113, University of Oxford, Department of Economics.
- John Hey & Jinkwon Lee, 2005. "Do Subjects Separate (or Are They Sophisticated)?," Experimental Economics, Springer;Economic Science Association, vol. 8(3), pages 233-265, September.
- Glenn Harrison & Morten Lau & Elisabet Rutstrom & Melonie Williams, 2002.
"Estimating individual discount rates in denmark: A field experiment,"
Artefactual Field Experiments
00062, The Field Experiments Website.
- Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," American Economic Review, American Economic Association, vol. 92(5), pages 1606-1617, December.
- Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2001. "Estimating Individual Discount Rates in Denmark: A Field Experiment," NCEE Working Paper Series 200102, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Nov 2001.
- Joseph Henrich & Richard McElreath, 2002. "Are peasants risk-averse decision makers?," Artefactual Field Experiments 00066, The Field Experiments Website.
- Rosenzweig, Mark R. & Wolpin, Kenneth I., 1989.
"Credit Market Constraints, Consumption Smoothing and the Accumulation of Durable Production Assets in Low-Income Countries: Investments in Bullocks in India,"
7487, University of Minnesota, Economic Development Center.
- Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-44, April.
- Hans P. Binswanger, 1980.
"Attitudes Toward Risk: Experimental Measurement in Rural India,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
- Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
- David McKenzie & Christopher Woodruff, 2008. "Experimental Evidence on Returns to Capital and Access to Finance in Mexico," World Bank Economic Review, World Bank Group, vol. 22(3), pages 457-482, November.
- Lorenz Goette & David Huffman & Ernst Fehr, .
"Loss Aversion and Labor Supply,"
IEW - Working Papers
178, Institute for Empirical Research in Economics - University of Zurich.
- Engle Warnick James C. & Escobal Javier & Laszlo Sonia C., 2011. "Ambiguity Aversion and Portfolio Choice in Small-Scale Peruvian Farming," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-56, November.
- Begley, Thomas M. & Boyd, David P., 1987. "Psychological characteristics associated with performence in entrepreneurial firms and smaller businesses," Journal of Business Venturing, Elsevier, vol. 2(1), pages 79-93.
- Holden, Stein T. & Shiferaw, Bekele & Wik, Mette, 1998. "Poverty, market imperfections and time preferences: of relevance for environmental policy?," Environment and Development Economics, Cambridge University Press, vol. 3(01), pages 105-130, February.
- Alkire, Sabina & Foster, James, 2011.
"Counting and multidimensional poverty measurement,"
Journal of Public Economics,
Elsevier, vol. 95(7-8), pages 476-487, August.
- Yesuf, Mahmud & Bluffstone, Randy, 2007. "Risk aversion in low income countries: Experimental evidence from Ethiopia," IFPRI discussion papers 715, International Food Policy Research Institute (IFPRI).
- John Knight & Sharada Weir & Tassew Woldehanna, 2003. "The role of education in facilitating risk-taking and innovation in agriculture," Journal of Development Studies, Taylor & Francis Journals, vol. 39(6), pages 1-22.
- Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
- Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
- Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
- Masao Ogaki & Andrew Atkeson, 1997. "Rate Of Time Preference, Intertemporal Elasticity Of Substitution, And Level Of Wealth," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 564-572, November.
- Travis J. Lybbert & David R. Just, 2007.
"Is Risk Aversion Really Correlated with Wealth? How Estimated Probabilities Introduce Spurious Correlation,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 89(4), pages 964-979.
- Lybbert, Travis J. & Just, David R., 2006. "Is Risk Aversion Really Correlated with Wealth? How estimated probabilities introduce spurious correlation," 2006 Annual meeting, July 23-26, Long Beach, CA 21167, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Katz, Eliakim & Stark, Oded, 1986. "Labor Migration and Risk Aversion in Less Developed Countries," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 134-49, January.
- George-Marios Angeletos, 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer.
- Thaler, Richard H, 1997. "Irving Fisher: Modern Behavioral Economist," American Economic Review, American Economic Association, vol. 87(2), pages 439-41, May.
- A.A. Adubi, 1996. "Impact of Socio‐Economic Factors on Risk Behaviour of Small Farmers: An Empirical Evidence from Oyo North Agricultural Development Project, Nigeria," African Development Review, African Development Bank, vol. 8(1), pages 115-125.
- Stiglitz, Joseph E, 1989. "Markets, Market Failures, and Development," American Economic Review, American Economic Association, vol. 79(2), pages 197-203, May.
When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:103:y:2013:i:c:p:52-61. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.