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The Impact of Violence on Individual Risk Preferences: Evidence from a Natural Experiment

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  • Pamela Jakiela

    (University of Maryland and IZA)

  • Owen Ozier

    (Development Research Group, The World Bank)

Abstract

This study estimates the impact of Kenya’s post-election violence on individual risk preferences. Because the crisis interrupted a longitudinal survey of more than five thousand Kenyan youth, this timing creates plausibly exogenous variation in exposure to civil conflict by the time of the survey. The study measures individual risk preferences using hypothetical lottery choice questions, which are validated by showing that they predict migration and entrepreneurship in the cross-section. The results indicate that the post-election violence sharply increased individual risk aversion. Immediately after the crisis, the fraction of subjects who are classified as either risk neutral or risk loving dropped by roughly 26 percent. The findings remain robust to an IV estimation strategy that exploits random assignment of respondents to waves of surveying.

Suggested Citation

  • Pamela Jakiela & Owen Ozier, 2015. "The Impact of Violence on Individual Risk Preferences: Evidence from a Natural Experiment," HiCN Working Papers 204, Households in Conflict Network.
  • Handle: RePEc:hic:wpaper:204
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    10. Muhammad Nasir & Marc Rockmore & Chih Ming Tan, 2015. "It's No Spring Break in Cancun: The Effects of Exposure to Violence on Risk Preferences, Pro-Social Behavior, and Mental Health," Working Paper series 15-40, Rimini Centre for Economic Analysis.
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    22. Dietmar Fehr & Yannick Reichlin, 2021. "Perceived Relative Wealth and Risk Taking," CESifo Working Paper Series 9253, CESifo.
    23. Pierre Magontier, 2020. "Does media coverage affect governments’ preparation for natural disasters?," Diskussionsschriften credresearchpaper29, Universitaet Bern, Departement Volkswirtschaft - CRED.
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    More about this item

    Keywords

    Risk Preferences; Civil Conflict; Natural Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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