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Household's risk attitudes in Indonesian villages

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  • Sachiko Miyata

Abstract

This paper estimates attitudes towards risk using data obtained through interviews of 400 households in villages in Indonesia. Participants were invited to play investment games in order to identify household risk attitudes. The game result supports the hypothesis of non-decreasing partial relative risk aversion. Using an ordered probit model, the determinants of risk attitude were investigated. The results show that the variable of co-residence is important: an individual living with his or her parents is less risk averse than an individual in a nuclear household. Co-residence can be viewed as a type of 'security blanket'. Partial relative risk aversion decreases with the level of education and wealth.

Suggested Citation

  • Sachiko Miyata, 2003. "Household's risk attitudes in Indonesian villages," Applied Economics, Taylor & Francis Journals, vol. 35(5), pages 573-583.
    • Handle: RePEc:taf:applec:v:35:y:2003:i:5:p:573-583
    DOI: 10.1080/0003684022000020823
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    References listed on IDEAS

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    1. Ogaki, Masao & Zhang, Qiang, 2001. "Decreasing Relative Risk Aversion and Tests of Risk Sharing," Econometrica, Econometric Society, vol. 69(2), pages 515-526, March.
    2. Masao Ogaki & Qiang Zhang, 2000. "Risk Sharing in Village India: the Rule of Decreasing Relative Risk Aversion," Working Papers 00-02, Ohio State University, Department of Economics.
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