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The Relationship between Cognitive Ability and Risk Preferences in a Developing Nation: Findings from the Field

Author

Listed:
  • Kelishomi, Ali Moghaddasi

    (Loughborough University)

  • Sgroi, Daniel

    (University of Warwick)

Abstract

We find a strong relationship between risk-loving preferences and cognitive ability which becomes stronger as adherence to the generalized axiom of revealed preference (a proxy for rationality) increases. Our results are taken from a field study of individuals at the very bottom of the income distribution in a developing nation. Our results for some of the poorest in the world support recent findings drawn from subjects in wealthy Western nations, suggesting there may be a stable relationship between risk preferences and cognitive ability for the human population as a whole irrespective of socio-economic status.

Suggested Citation

  • Kelishomi, Ali Moghaddasi & Sgroi, Daniel, 2022. "The Relationship between Cognitive Ability and Risk Preferences in a Developing Nation: Findings from the Field," IZA Discussion Papers 15266, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15266
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    References listed on IDEAS

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    10. repec:cup:judgdm:v:1:y:2006:i::p:33-47 is not listed on IDEAS
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    More about this item

    Keywords

    risk; cognitive ability; rationality; generalized axiom of revealed preference; field experiment; low incomes; developing nation;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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