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Health shocks and risk aversion

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  • Decker, Simon
  • Schmitz, Hendrik

Abstract

We empirically assess whether a health shock influences individual risk aversion. We use grip strength data to obtain an objective health shock indicator. In order to account for the non-random nature of our data regression-adjusted matching is employed. Risk preferences are traditionally assumed to be constant. However, we find that a health shock increases individual risk aversion. The finding is robust to a series of sensitivity analyses and persists for at least four years after the shock. Income changes do not seem to be the driving mechanism.

Suggested Citation

  • Decker, Simon & Schmitz, Hendrik, 2016. "Health shocks and risk aversion," Journal of Health Economics, Elsevier, vol. 50(C), pages 156-170.
    • Handle: RePEc:eee:jhecon:v:50:y:2016:i:c:p:156-170
    DOI: 10.1016/j.jhealeco.2016.09.006
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    More about this item

    Keywords

    Risk preferences; Health shocks; Hand grip strength; Objective health; Regression-adjusted matching;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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