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On the Sources of Risk Preferences in Rural Vietnam

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  • Anh Duc Dang

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Abstract

In this paper, I provide new empirical evidence that the natural environment can shape individual risk preferences. By combining historical data on weather variation and contemporary survey questions on risk aversion, I find that risk aversion is significantly different for people who live in areas that have suffered high frequency of natural disasters. In particular, households highly affected by weather volatility show a longterm risk aversion and are more willing to buy insurance to protect crop losses. The finding also supports the hypothesis that when people are used to live in a risky environment, an incremental increase in risk affects their risk preferences less.

Suggested Citation

  • Anh Duc Dang, 2012. "On the Sources of Risk Preferences in Rural Vietnam," ANU Working Papers in Economics and Econometrics 2012-593, Australian National University, College of Business and Economics, School of Economics.
  • Handle: RePEc:acb:cbeeco:2012-593
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    File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp593.pdf
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    References listed on IDEAS

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    7. Yamauchi, Futoshi & Yohannes, Yisehac & Quisumbing, Agnes, 2009. "Natural disasters, self-insurance and human capital investment : evidence from Bangladesh, Ethiopia and Malawi," Policy Research Working Paper Series 4910, The World Bank.
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    Cited by:

    1. Muhammad Ryan SANJAYA, 2013. "Shocks, Physical Characteristics, and Risk Taking Behaviour," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(9), pages 1081-1105, September.
    2. Hallegatte,Stephane & Bangalore,Mook & Jouanjean,Marie Agnes, 2016. "Higher losses and slower development in the absence of disaster risk management investments," Policy Research Working Paper Series 7632, The World Bank.
    3. Sanjaya, Muhammad Ryan, 2013. "On the source of risk aversion in Indonesia using micro data 2007," Economics Discussion Papers 2013-33, Kiel Institute for the World Economy (IfW).

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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