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Risk aversion, patience and intelligence: Evidence based on macro data

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  • Potrafke, Niklas

Abstract

Using the new macro data on risk aversion and patience by Falk et al. (2018), I show that risk aversion and patience are related to intelligence: high-IQ populations are more patient and more risk averse than low-IQ populations. The correlation between patience and intelligence corroborates previous results based on micro data. Intelligent people tend to be patient because they have long time horizons. The correlation between risk aversion and intelligence supports new micro data studies based on dynamically optimized sequential experimentation (Chapman et al. 2018).

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  • Potrafke, Niklas, 2019. "Risk aversion, patience and intelligence: Evidence based on macro data," Economics Letters, Elsevier, vol. 178(C), pages 116-120.
  • Handle: RePEc:eee:ecolet:v:178:y:2019:i:c:p:116-120
    DOI: 10.1016/j.econlet.2019.02.026
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    1. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2010. "Are Risk Aversion and Impatience Related to Cognitive Ability?," American Economic Review, American Economic Association, vol. 100(3), pages 1238-1260, June.
    2. Armin Falk & Anke Becker & Thomas Dohmen & Benjamin Enke & David Huffman & Uwe Sunde, 2018. "Global Evidence on Economic Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 133(4), pages 1645-1692.
    3. Jonathan Chapman & Erik Snowberg & Stephanie Wang & Colin Camerer, 2018. "Loss Attitudes in the U.S. Population: Evidence from Dynamically Optimized Sequential Experimentation (DOSE)," NBER Working Papers 25072, National Bureau of Economic Research, Inc.
    4. Erik Snowberg & Leeat Yariv, 2018. "Testing the Waters: Behavior across Participant Pools," NBER Working Papers 24781, National Bureau of Economic Research, Inc.
    5. Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2016. "Risk Aversion Relates to Cognitive Ability: Preferences Or Noise?," Journal of the European Economic Association, European Economic Association, vol. 14(5), pages 1129-1154.
    6. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2018. "On the Relationship between Cognitive Ability and Risk Preference," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 115-134, Spring.
    7. Potrafke, Niklas, 2012. "Intelligence and corruption," Economics Letters, Elsevier, vol. 114(1), pages 109-112.
    8. Snowberg, Erik & Yariv, Leeat, 2018. "Testing the Waters: Behavior across Participant Pools," CEPR Discussion Papers 13015, C.E.P.R. Discussion Papers.
    9. Salahodjaev, Raufhon, 2015. "Intelligence and Shadow Economy: a Cross-Country Empirical Assessment," MPRA Paper 61976, University Library of Munich, Germany.
    10. Erik Snowberg & Leeat Yariv, 2018. "Testing the Waters: Behavior across Participant Pools," CESifo Working Paper Series 7136, CESifo.
    11. Armin Falk & Anke Becker & Thomas Dohmen & Benjamin Enke & David B. Huffman & Uwe Sunde, 2017. "Global Evidence on Economic Preferences," NBER Working Papers 23943, National Bureau of Economic Research, Inc.
    12. Mohammad Reza Farzanegan, 2020. "Cognitive ability and corruption: rule of law (still) matters," Empirical Economics, Springer, vol. 59(4), pages 1723-1743, October.
    13. Saul Pleeter & John T. Warner, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, vol. 91(1), pages 33-53, March.
    14. Garett Jones & Niklas Potrafke, 2014. "Human Capital and National Institutional Quality: Are TIMSS, PISA, and National Average IQ Robust Predictors?," CESifo Working Paper Series 4790, CESifo.
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    Cited by:

    1. Mohammad Reza Farzanegan, 2020. "Cognitive ability and corruption: rule of law (still) matters," Empirical Economics, Springer, vol. 59(4), pages 1723-1743, October.
    2. Emanuela Guarcello, 2020. "Character Skills and Patience to Promote Resilience in Children - Education in Primary Schools After Pandemic," European Journal of Social Sciences Education and Research Articles, European Center for Science Education and Research, vol. 7, May - Aug.
    3. Aronsson, Thomas & Hetschko, Clemens & Schöb, Ronnie, 2020. "Globalization, Time-Preferences, and Populist Voting," Umeå Economic Studies 978, Umeå University, Department of Economics.

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    More about this item

    Keywords

    Risk aversion; Patience; Intelligence;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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