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Childhood Determinants of Risk Aversion: The Long Shadow of Compulsory Education

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  • Hryshko, Dmytro
  • Luengo-Prado, Maria Jose
  • Sørensen, Bent E

Abstract

We study the determinants of individual attitudes towards risk and, in particular, why some individuals exhibit extremely high risk aversion. Using data from the Panel Study of Income Dynamics we find that a policy induced increase in high school graduation rates leads to significantly fewer individuals being highly risk averse in the next generation. Other significant determinants of risk aversion are age, sex, and parents' risk aversion. We verify that risk aversion matters for economic behavior in that it predicts individuals' volatility of income.

Suggested Citation

  • Hryshko, Dmytro & Luengo-Prado, Maria Jose & Sørensen, Bent E, 2010. "Childhood Determinants of Risk Aversion: The Long Shadow of Compulsory Education," CEPR Discussion Papers 7999, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7999
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    References listed on IDEAS

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    More about this item

    Keywords

    high school movement; intergenerational transmission;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I29 - Health, Education, and Welfare - - Education - - - Other

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