All over the map: A worldwide comparison of risk preferences

Abstract

We obtain rich measurements of risk preferences for 2939 subjects across 30 countries, and use the data to paint a picture of the distribution of risk preferences across the globe using structural equation models. Reference-dependence and likelihood-dependence are found to be important everywhere. Model parameters in non-Western countries differ systematically from those in Western countries, with poorer countries substantially more risk tolerant than rich countries on average. We qualify previous findings on gender effects and cognitive ability by showing how they mainly impact likelihood-dependence. We further add novel evidence on the correlation between risk preferences and study major. Whereas we confirm previous results on observable characteristics of subjects explaining little of overall preference heterogeneity, a few macroeconomic indicators can explain a considerable part of the between-country heterogeneity.

Assimilation in the Risk Preferences of Spouses

“…For larger probabilities, however, women are somewhat more risk averse than their husbands (statistics and tests for all the prospects can be found in the Appendix). This corresponds to findings in structural models showing that gender effects may interact with the probability of winning in a prospect, rather than having a uniform effect on risk preferences (L'Haridon and Vieider ). It is also consistent with recent evidence from a large meta‐analysis showing that gender effects may be weak or nonexistent when measured in multiple choice lists (Filippin and Crosetto ).…”

“…This corresponds to previous evidence from the Ethiopian highlands obtained by Vieider et al (Forthcoming). It amounts to a generalization to the overall trends found in international comparisons using student data (L'Haridon and Vieider ), which found students from poorer countries to be systematically more risk tolerant than students from rich countries.…”

Individual preferences and farm-level decisions : experimental evidence from Costa Rica

“…We model individual preferences following L'Haridon and Vieider (2017). They use a cumulative prospect theory model (CPT) in the format (p: x:y), where p is the probability of obtaining the outcome x and y is achieved with the corresponding probability (1-p), |x| > |y|.…”

“…They use a cumulative prospect theory model (CPT) in the format (p: x:y), where p is the probability of obtaining the outcome x and y is achieved with the corresponding probability (1-p), |x| > |y|. We assume preferences are reference-dependent and, in the experiment, are framed with a reference point equal to zero (Abdellaoui et al 2011;L'Haridon and Vieider 2017;Tversky and Kahneman 1992). 11 The utility of a prospect (PU) for outcomes that fit in one domain (gain or loss) can be represented as follows:…”

“…We follow the functional forms indicated by L'Haridon and Vieider (2017) and assume a piecewise linear utility function as follows:…”