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Risk-Averse by Nation or by Religion?: Some Insights on the Determinants of Individual Risk Attitudes

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  • Stephan Bartke
  • Reimund Schwarze

Abstract

Research findings have proven that the willingness to take risks is distributed heterogeneously among individuals. In the general public, there is a widely held notion that individuals of certain nationalities tend to hold certain typical risk preferences. Furthermore, religious beliefs are thought to explain differences in risk-preparedness on the individual level. We analyze these two possible determinants of individual risk attitudes: nationality and religion. First addressing the study of risk attitudes in a literature review, we then test our hypotheses empirically using the large, representative German Socio-Economic Panel (SOEP). To understand the importance of nationality, we focus on emigrants to Germany. The key findings are: (1) Nationality is not a valid determinant of risk attitudes. It can be broken down into several constituent factors including religion. (2) Religiousness is a significant determinant of risk attitudes. Religious persons are less risk-tolerant than atheists. Moreover, religious affiliation matters: Muslims are less risk-tolerant than Christians.

Suggested Citation

  • Stephan Bartke & Reimund Schwarze, 2008. "Risk-Averse by Nation or by Religion?: Some Insights on the Determinants of Individual Risk Attitudes," SOEPpapers on Multidisciplinary Panel Data Research 131, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp131
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.89494.de/diw_sp0131.pdf
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    References listed on IDEAS

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    1. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
    2. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Juergen Schupp & Gert Wagner, 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," Working Papers 2096, The Field Experiments Website.
    3. Azzi, Corry & Ehrenberg, Ronald G, 1975. "Household Allocation of Time and Church Attendance," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 27-56, February.
    4. Laurence R. Iannaccone, 1998. "Introduction to the Economics of Religion," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1465-1495, September.
    5. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2012. "The Intergenerational Transmission of Risk and Trust Attitudes," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 645-677.
    6. Lehrer, Evelyn L., 2008. "The Role of Religion in Economic and Demographic Behavior in the United States: A Review of the Recent Literature," IZA Discussion Papers 3541, Institute for the Study of Labor (IZA).
    7. David A. Jaeger & Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Holger Bonin, 2010. "Direct Evidence on Risk Attitudes and Migration," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 684-689, August.
    8. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    9. Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-474, June.
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    Citations

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    Cited by:

    1. Roland Bénabou & Davide Ticchi & Andrea Vindigni, 2015. "Religion and Innovation," American Economic Review, American Economic Association, vol. 105(5), pages 346-351, May.
    2. Olaf Hübler, 2013. "Are Tall People Less Risk Averse Than Others?," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 133(1), pages 23-42.
    3. Tracey West & Andrew Worthington, 2014. "Macroeconomic Conditions and Australian Financial Risk Attitudes, 2001–2010," Journal of Family and Economic Issues, Springer, vol. 35(2), pages 263-277, June.
    4. Haneishi, Yusuke & Maruyama, Atsushi & Takagaki, Michiko & Kikuchi, Masao, 2014. "Farmers’ risk attitudes to influence the productivity and planting decision: A case of rice and maize cultivation in rural Uganda," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 9(4), December.
    5. Yaron Zelekha & Gil Avnimelech & Eyal Sharabi, 2014. "Religious institutions and entrepreneurship," Small Business Economics, Springer, vol. 42(4), pages 747-767, April.
    6. Martin Eling & Shailee Pradhan & Joan T Schmit, 2014. "The Determinants of Microinsurance Demand," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(2), pages 224-263, April.
    7. Dennis D. Fehrenbacher & Claudia R Schneider & Elke U. Weber, 2017. "Catch me if I fall: Cross-national differences in willingness to take financial risks as a function of social and state ‘cushioning’," LWS Working papers 16, LIS Cross-National Data Center in Luxembourg.
    8. Anja Koebrich Leon & Christian Pfeifer, 2013. "An Empirical Note on Religiosity and Social Trust using German Survey Data," Economics Bulletin, AccessEcon, vol. 33(1), pages 753-763.
    9. Hamed Ekhtiari & Ali Jannati & Morteza Dehghani & Azarakhsh Mokri, 2009. "Prefer a cash slap in your face over credit for halva," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(7), pages 534-542, December.

    More about this item

    Keywords

    Risk Aversion; Nationality; Immigrants; Religion; Germany;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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