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Intergenerational Transmission of Risk Preferences, Entrepreneurship, and Growth

  • Fabrizio Zilibotti

    (University of Zurich)

  • Matthias Doepke

    (Northwestern University)

We develop a theory of the intergenerational transmission of risk preferences. Parents can instill either risk tolerance or risk aversion in their children, and face both altruistic and paternalistic motives in this process. Risk-tolerant children are more likely to benefit from profitable but risky opportunities, such as the career choice of being an entrepreneur. However, risk-tolerant children may also engage in other risky choices (such as smoking or riding motorcycles) that the parents disagree with. In our model, the transmission of risk preferences feeds back into the growth rate of the economy, because risk-taking entrepreneurs are essential for endogenous technological innovation. The theory has implications for how the extent and nature of risk in the economic environment affects the transmission of risk preferences, entrepreneurship, and growth.

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 246.

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Date of creation: 2012
Date of revision:
Handle: RePEc:red:sed012:246
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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  1. Alison L. Booth & Patrick Nolen, 2009. "Gender Differences in Risk Behaviour: Does Nurture Matter?," CEPR Discussion Papers 601, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  2. Nezih Guner & Jeremy Greenwood & Jesus Fernandez-Villaverde, 2012. "From Shame to Game in One Hundred Years: A Macroeconomic Model of the Rise in Premarital Sex and its De-Stigmatization," 2012 Meeting Papers 95, Society for Economic Dynamics.
  3. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
  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. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
  6. Galor, Oded & Michalopoulos, Stelios, 2012. "Evolution and the growth process: Natural selection of entrepreneurial traits," Journal of Economic Theory, Elsevier, vol. 147(2), pages 759-780.
  7. Galina Vereshchagina & Hugo A. Hopenhayn, 2009. "Risk Taking by Entrepreneurs," American Economic Review, American Economic Association, vol. 99(5), pages 1808-30, December.
  8. Guido Tabellini, 2010. "Culture and Institutions: Economic Development in the Regions of Europe," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 677-716, 06.
  9. van Praag, C M & Cramer, J S, 2001. "The Roots of Entrepreneurship and Labour Demand: Individual Ability and Low Risk Aversion," Economica, London School of Economics and Political Science, vol. 68(269), pages 45-62, February.
  10. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
  11. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
  12. Matthias Doepke & Fabrizio Zilibotti, 2005. "Social Class and the Spirit of Capitalism," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 516-524, 04/05.
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