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Peer Effects in Risk Aversion

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  • Ana I. Balsa
  • Néstor Gandelman
  • Nicolás González

Abstract

We estimate peer effects in risk attitudes in a sample of high school students. Relative risk aversion is elicited from surveys administered at school. Identification of peer effects is based on parents not being able to choose the class within the school of their choice, and on the use of instrumental variables conditional on school‐grade fixed effects. We find a significant and quantitatively large impact of peers’ risk attitudes on a male individual's coefficient of risk aversion. Specifically, a one standard deviation increase in the group's coefficient of risk aversion increases an individual's risk aversion by 43%. Our findings shed light on the origin and stability of risk attitudes and, more generally, on the determinants of economic preferences.

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  • Ana I. Balsa & Néstor Gandelman & Nicolás González, 2015. "Peer Effects in Risk Aversion," Risk Analysis, John Wiley & Sons, vol. 35(1), pages 27-43, January.
    • Handle: RePEc:wly:riskan:v:35:y:2015:i:1:p:27-43
    DOI: 10.1111/risa.12260
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    3. Ceballos, Francisco & Robles, Miguel, 2020. "Demand heterogeneity for index-based insurance: The case for flexible products," Journal of Development Economics, Elsevier, vol. 146(C).
    4. Bukstein Daniel & Gandelman Nestor, 2018. "Cohort, Age and Business Cycle Effects in Entrepreneurship in Latin America," Entrepreneurship Research Journal, De Gruyter, vol. 8(3), pages 1-13, July.
    5. Balsa, Ana & Gandelman, Néstor & Roldán, Flavia, 2018. "Peer and parental influence in academic performance and alcohol use," Labour Economics, Elsevier, vol. 55(C), pages 41-55.
    6. Angela C. M. Oliveira, 2021. "When risky decisions generate externalities," Journal of Risk and Uncertainty, Springer, vol. 63(1), pages 59-79, August.
    7. Balsa, Ana & Gandelman, Néstor & Roldán, Flavia, 2015. "Peer Effects in the Development of Capabilities in Adolescence," Research Department working papers 820, CAF Development Bank Of Latinamerica.
    8. Francesca Gioia, 2017. "Peer effects on risk behaviour: the importance of group identity," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 100-129, March.
    9. Ana Balsa & Carlos Díaz, 2018. "Social interactions in health behaviors and conditions," Documentos de Trabajo/Working Papers 1802, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
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    11. Mark J. Browne & Annette Hofmann & Andreas Richter & Sophie-Madeleine Roth & Petra Steinorth, 2021. "Peer effects in risk preferences: Evidence from Germany," Annals of Operations Research, Springer, vol. 299(1), pages 1129-1163, April.

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    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • D1 - Microeconomics - - Household Behavior

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