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Does flood experience modify risk preferences? Evidence from an artefactual field experiment in Vietnam

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  • Arnaud Reynaud

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Cécile Aubert

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We conducted an artefactual field experiment in Vietnam to investigate whether and how experiencing a natural disaster affects individual attitudes toward risks. Using experimental and real household data, we show that households in villages affected by a flood in recent years exhibit more risk aversion, compared with individuals living in similar but unaffected villages. Interestingly, this result holds for the loss domain, but not the gain domain. In line with Prospect Theory, Vietnamese households distort probabilities. The distortion is related to aid received and social networks participation, but is unrelated to flood experience.

Suggested Citation

  • Arnaud Reynaud & Cécile Aubert, 2020. "Does flood experience modify risk preferences? Evidence from an artefactual field experiment in Vietnam," Post-Print hal-03050685, HAL.
    • Handle: RePEc:hal:journl:hal-03050685
    DOI: 10.1057/s10713-019-00044-w
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    9. Athira, A. & Ramesh, Vishnu K., 2023. "COVID-19 and corporate tax avoidance: International evidence," International Business Review, Elsevier, vol. 32(4).
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    Keywords

    Risk preferences; Non-expected utility; Flood; Vietnam; Field experiment;
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