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On the sources of risk preferences in rural Vietnam

  • Dang, Duc Anh
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    In this paper, I provide a new empirical evidence that natural environment can shape individual risk preferences. By combining historical data on climate variation and contemporary survey questions on risk aversion, I find that risk aversion is significantly different for people who live in areas that have suffered high frequency of natural disasters. In particular, individuals highly affected by climate volatility show a long term risk aversion. The finding also supports the hypothesis that when people used to live in risky environment, an incremental increase in risk affects their risk preferences less.

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    File URL: http://mpra.ub.uni-muenchen.de/38738/1/MPRA_paper_38738.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38738.

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    Date of creation: Apr 2012
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    Handle: RePEc:pra:mprapa:38738
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    1. Sachiko Miyata, 2003. "Household's risk attitudes in Indonesian villages," Applied Economics, Taylor & Francis Journals, vol. 35(5), pages 573-583.
    2. Timothy Halliday, 2005. "Migration, Risk and Liquidity Constraints in El Salvador," Working Papers 200511, University of Hawaii at Manoa, Department of Economics, revised 28 Mar 2006.
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    4. Ulrike Malmendier & Stefan Nagel, 2009. "Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?," NBER Working Papers 14813, National Bureau of Economic Research, Inc.
    5. Yang Dean, 2008. "Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-45, June.
    6. Yamauchi, Futoshi & Yohannes, Yisehac & Quisumbing, Agnes R., 2009. "Natural disasters, self-Insurance, and human capital investment: Evidence from Bangladesh, Ethiopia, and Malawi," IFPRI discussion papers 881, International Food Policy Research Institute (IFPRI).
    7. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, 06.
    8. Alma Cohen & Liran Einav, 2007. "Estimating Risk Preferences from Deductible Choice," American Economic Review, American Economic Association, vol. 97(3), pages 745-788, June.
    9. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
    10. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
    11. Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
    12. Booij, Adam S. & van de Kuilen, Gijs, 2009. "A parameter-free analysis of the utility of money for the general population under prospect theory," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 651-666, August.
    13. Durante, Ruben, 2009. "Risk, Cooperation and the Economic Origins of Social Trust: an Empirical Investigation," MPRA Paper 25887, University Library of Munich, Germany.
    14. Paul Dolan & Daniel Kahneman, 2008. "Interpretations Of Utility And Their Implications For The Valuation Of Health," Economic Journal, Royal Economic Society, vol. 118(525), pages 215-234, 01.
    15. Eckel, Catherine C. & Grossman, Philip J., 2008. "Differences in the Economic Decisions of Men and Women: Experimental Evidence," Handbook of Experimental Economics Results, Elsevier.
    16. Finlay, Jocelyn E., 2009. "Fertility response to natural disasters : the case of three high mortality earthquakes," Policy Research Working Paper Series 4883, The World Bank.
    17. W. Kip Viscusi & Joni Hersch, 2001. "Cigarette Smokers As Job Risk Takers," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 269-280, May.
    18. Quang Nguyen, 2011. "Does nurture matter: Theory and experimental investigation on the effect of working environment on risk and time preferences," Journal of Risk and Uncertainty, Springer, vol. 43(3), pages 245-270, December.
    19. van den Berg, Marrit & Fort, Ricardo & Burger, Kees, 2009. "Natural Hazards And Risk Aversion: Experimental Evidence From Latin America," 2009 Conference, August 16-22, 2009, Beijing, China 51394, International Association of Agricultural Economists.
    20. Nathan Nunn & Leonard Wantchekon, 2011. "The Slave Trade and the Origins of Mistrust in Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3221-52, December.
    21. Baez, Javier E. & de la Fuente, Alejandro & Santos, Indhira, 2010. "Do Natural Disasters Affect Human Capital? An Assessment Based on Existing Empirical Evidence," IZA Discussion Papers 5164, Institute for the Study of Labor (IZA).
    22. Mohammed Abdellaoui, 2000. "Parameter-Free Elicitation of Utility and Probability Weighting Functions," Management Science, INFORMS, vol. 46(11), pages 1497-1512, November.
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