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Childhood Determinants of Risk Aversion: The Long Shadow of Compulsory Education

Author

Listed:
  • Hryshko, Dmytro

    (University of Alberta, Department of Economics)

  • Luengo-Prado, Maria Jose

    (Northeastern University)

  • Sorensen, Bent

    (University of Houston)

Abstract

We study the determinants of individual attitudes towards risk and,in particular,why some individuals exhibit extremely high risk aversion. Using data from the Panel Study of Income Dynamics we find that policy induced increases in high school graduation rates lead to significantly fewer individuals being highly risk averse in the next generation. Other significant determinants of risk aversion are age, sex, and parents' risk aversion. We verify that risk aversion matters for economic behavior in that it predicts individuals' volatility of income.

Suggested Citation

  • Hryshko, Dmytro & Luengo-Prado, Maria Jose & Sorensen, Bent, 2011. "Childhood Determinants of Risk Aversion: The Long Shadow of Compulsory Education," Working Papers 2011-2, University of Alberta, Department of Economics.
  • Handle: RePEc:ris:albaec:2011_002
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    More about this item

    Keywords

    schooling reforms; risk attitudes; intergenerational persistence;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I29 - Health, Education, and Welfare - - Education - - - Other

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