IDEAS home Printed from https://ideas.repec.org/p/adv/wpaper/201211.html

Peer Effects in Risk Aversion

Author

Listed:
  • Néstor Gandelman

    (Universidad ORT Uruguay)

  • Ana Balsa

    (Universidad de Montevideo)

  • Nicolás González

    (CEMFI)

Abstract

Using data on Uruguayan adolescents, we estimate peer effects in risk attitudes. Relative risk aversion is elicited in an experimental setting. Identification is based on parents not being able to choose the class within the school of their choice. After controlling for school-grade fixed effect and addressing endogeneity due to simultaneity, we find a significant and quantitative large impact of peers on individuals risk aversion. An increase in one standard deviation of the group risk aversion produces an increase in 44-64% on an individual risk aversion. These findings enhance the importance of multiplicative effects related to risk behavior.

Suggested Citation

  • Néstor Gandelman & Ana Balsa & Nicolás González, 2012. "Peer Effects in Risk Aversion," Development Research Working Paper Series 11/2012, Institute for Advanced Development Studies.
    • Handle: RePEc:adv:wpaper:201211
    as

    Download full text from publisher

    File URL: http://www.inesad.edu.bo/pdf/wp2012/wp11_2012.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Balsa, Ana & Gandelman, Néstor & Porzecanski, Rafael, 2010. "The Impact of ICT on Adolescents' Perceptions and Consumption of Substances," IDB Publications (Working Papers) 3336, Inter-American Development Bank.
    2. Hansen, Lars Peter & Heaton, John & Yaron, Amir, 1996. "Finite-Sample Properties of Some Alternative GMM Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 262-280, July.
    3. Kohei Daido, 2004. "Risk-averse agents with peer pressure," Applied Economics Letters, Taylor & Francis Journals, vol. 11(6), pages 383-386.
    4. David Cesarini & Magnus Johannesson & Paul Lichtenstein & Örjan Sandewall & Björn Wallace, 2010. "Genetic Variation in Financial Decision‐Making," Journal of Finance, American Finance Association, vol. 65(5), pages 1725-1754, October.
    5. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    6. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    7. Alejandro Gaviria & Steven Raphael, 2001. "School-Based Peer Effects And Juvenile Behavior," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 257-268, May.
    8. Alison L. Booth & Patrick Nolen, 2012. "Gender differences in risk behaviour: does nurture matter?," Economic Journal, Royal Economic Society, vol. 122(558), pages 56-78, February.
    9. Lundborg, Petter, 2006. "Having the wrong friends? Peer effects in adolescent substance use," Journal of Health Economics, Elsevier, vol. 25(2), pages 214-233, March.
    10. Patrick Bayer & Randi Hjalmarsson & David Pozen, 2009. "Building Criminal Capital behind Bars: Peer Effects in Juvenile Corrections," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 105-147.
    11. Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 537-579.
    12. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 531-542.
    13. Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-474, June.
    14. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    15. Lilian Ng & Fei Wu, 2010. "Peer Effects in the Trading Decisions of Individual Investors," Financial Management, Financial Management Association International, vol. 39(2), pages 807-831, June.
    16. Clark, Andrew E. & Loheac, Youenn, 2007. ""It wasn't me, it was them!" Social influence in risky behavior by adolescents," Journal of Health Economics, Elsevier, vol. 26(4), pages 763-784, July.
    17. Eckel, Catherine C. & Grossman, Philip J., 2008. "Men, Women and Risk Aversion: Experimental Evidence," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 113, pages 1061-1073, Elsevier.
    18. Trogdon, Justin G. & Nonnemaker, James & Pais, Joanne, 2008. "Peer effects in adolescent overweight," Journal of Health Economics, Elsevier, vol. 27(5), pages 1388-1399, September.
    19. Powell, Lisa M. & Tauras, John A. & Ross, Hana, 2005. "The importance of peer effects, cigarette prices and tobacco control policies for youth smoking behavior," Journal of Health Economics, Elsevier, vol. 24(5), pages 950-968, September.
    20. Cragg, John G. & Donald, Stephen G., 1993. "Testing Identifiability and Specification in Instrumental Variable Models," Econometric Theory, Cambridge University Press, vol. 9(2), pages 222-240, April.
    21. Jinyong Hahn & Jerry Hausman & Guido Kuersteiner, 2004. "Estimation with weak instruments: Accuracy of higher-order bias and MSE approximations," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 272-306, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. 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.
    3. Ana Balsa & Carlos D az, 2018. "Social interactions in health behaviors and conditions," Documentos de Trabajo/Working Papers 1802, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Ana Balsa & N stor Gandelman & Flavia Rold n, 2017. "Peer and parental influence in the development of cognitive skills and predispostion to risky behaviour," Documentos de Trabajo/Working Papers 1701, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
    3. 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.
    4. Ana Balsa, 2016. "Peer effects vs. parental influence in the development of capabilities in adolescence," Documentos de Trabajo/Working Papers 1609, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
    5. Yakusheva, Olga & Kapinos, Kandice & Weiss, Marianne, 2011. "Peer effects and the Freshman 15: Evidence from a natural experiment," Economics & Human Biology, Elsevier, vol. 9(2), pages 119-132, March.
    6. Chih‐Sheng Hsieh & Lung‐Fei Lee & Vincent Boucher, 2020. "Specification and estimation of network formation and network interaction models with the exponential probability distribution," Quantitative Economics, Econometric Society, vol. 11(4), pages 1349-1390, November.
    7. Ryota Nakamura & Marc Suhrcke & Daniel John Zizzo, 2017. "A triple test for behavioral economics models and public health policy," Theory and Decision, Springer, vol. 83(4), pages 513-533, December.
    8. 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.
    9. Ana Balsa & Carlos D az, 2018. "Social interactions in health behaviors and conditions," Documentos de Trabajo/Working Papers 1802, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
    10. Paul Frijters & Asad Islam & Chitwan Lalji & Debayan Pakrashi, 2019. "Roommate effects in health outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 28(8), pages 998-1034, August.
    11. Miyazato, Naomi & Ibuka, Yoko & Itaya, Jun-ichi, 2024. "Peer effects on influenza vaccination: Evidence from a city's administrative data in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 74(C).
    12. Renna, Francesco & Grafova, Irina B. & Thakur, Nidhi, 2008. "The effect of friends on adolescent body weight," Economics & Human Biology, Elsevier, vol. 6(3), pages 377-387, December.
    13. Strombotne, Kiersten L. & Fletcher, Jason M. & Schlesinger, Mark J., 2019. "Peer effects of obesity on child body composition," Economics & Human Biology, Elsevier, vol. 34(C), pages 49-57.
    14. Ali Palali & Jan C. Van ours, 2017. "Love Conquers all but Nicotine: Spousal Peer Effects on the Decision to Quit Smoking," Health Economics, John Wiley & Sons, Ltd., vol. 26(12), pages 1710-1727, December.
    15. Eisenberg, Daniel & Golberstein, Ezra & Whitlock, Janis L., 2014. "Peer effects on risky behaviors: New evidence from college roommate assignments," Journal of Health Economics, Elsevier, vol. 33(C), pages 126-138.
    16. Koen Deconinck & Jo Swinnen, 2012. "Peer Effects in Alcohol Consumption: Evidence from Russia’s Beer Boom," LICOS Discussion Papers 31612, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    17. 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.
    18. Palali, Ali & van Ours, Jan, 2015. "Love Conquers All but Nicotine : Spousal Peer Effects on the Decision to Quit Smoking," Discussion Paper 2015-048, Tilburg University, Center for Economic Research.
    19. Ali Palali & Jan C. Van ours, 2017. "Love Conquers all but Nicotine: Spousal Peer Effects on the Decision to Quit Smoking," Health Economics, John Wiley & Sons, Ltd., vol. 26(12), pages 1710-1727, December.
    20. Rosa Duarte & Jose Julián Escario & José Alberto Molina, 2011. "Peer Effects, Unobserved Factors And Risk Behaviours In Adolescence," Revista de Economia Aplicada, Universidad de Zaragoza, Departamento de Estructura Economica y Economia Publica, vol. 19(1), pages 125-151, Spring.

    More about this item

    Keywords

    ;
    ;

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:adv:wpaper:201211. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lykke Andersen (email available below). General contact details of provider: https://edirc.repec.org/data/inesabo.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.