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The development of risk aversion and prudence in Chinese children and adolescents

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  • Heinrich, Timo
  • Shachat, Jason

Abstract

This study experimentally evaluates the risk preferences of children and adolescents living in an urban Chinese environment. We use a simple binary choice task that tests risk aversion as well as prudence. This is the first test for prudence in children and adolescents. Our results reveal that subjects from grades 5 to 11 (10 to 17 years) make mostly risk averse and prudent choices. With respect to risk aversion behavior of 3rd graders (8 to 9 years) does not differ statistically from risk neutrality. We also find 3rd graders to make mostly prudent choices. We also find evidence for a transmission of preferences: risk aversion is significantly correlated between children and their parents. Also, prudence is significantly correlated between girls (but not boys) and their parents.

Suggested Citation

  • Heinrich, Timo & Shachat, Jason, 2018. "The development of risk aversion and prudence in Chinese children and adolescents," MPRA Paper 86456, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:86456
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    Keywords

    risk aversion; prudence; transmission of preferences; age effects; experimental economics; children;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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