Do Risk Preferences Change? Evidence from Panel Data before and after the Great East Japan Earthquake

Abstract

We investigate whether individuals' risk preferences change after experiencing a natural disaster, specifically, the 2011 Great East Japan Earthquake. Exploiting the panels of nationally representative surveys on risk preferences, we find that men who experienced greater intensity of the Earthquake became more risk tolerant after the Earthquake. Furthermore, these men gamble more, which is consistent with the direction of changes in risk preferences. We find no such pattern for women. Finally, the effects on men's risk preferences are persistent even five years after the Earthquake at almost the same magnitude as those shortly after the Earthquake.

How Natural Disasters Can Affect Environmental Concerns, Risk Aversion, and Even Politics: Evidence from Fukushima and Three European Countries

“…The unbalanced OLS models show attenuated and insignificant effects, while focusing on changes in risk aversion for the same individuals over 2 years yields larger and more precisely estimated effects. This finding is in line with Hanaoka et al (2014).…”

“…Dohmen et al, 2011), the finding provides evidence for the validity of both hypotheses (ii) and (iii). It may also be seen in stark contrast to Hanaoka et al (2014) who estimate post-Fukushima changes in risk preferences for Japan and who differentiate the effects by affected regions. They show that (directly) affected individuals became less risk averse after the disaster.…”

“…Finally, this paper contributes to the literature on the determinants and impacts of risk aversion (Lusk and Coble, 2008;Eckel et al, 2009;Cassar et al, 2011;Malmendier and Nagel, 2011;Huang et al, 2013, Hanaoka et al, 2014Cohn et al, 2015;Vieider et al, 2015;Shah and Cameron, 2015) and environmental 2 In addition to these three studies focusing on well-being, Bauer et al (2013) study the impact of the shutdown of reactors on housing prices in Germany. They find that housing prices decreased by between 6 and 12%.…”

“…Hanaoka et al (2014) exploit the Japan Household Panel Survey on Consumer Preferences and Satisfaction and variation in affected Japanese regions. They find that respondents in more affected regions became more risk tolerant.…”

The Impact of Violence on Individual Risk Preferences: Evidence from a Natural Experiment

“…Stigler and Becker 1977); instead, individual preferences appear to be shaped by life experiences. For example, Malmendier andNagel (2011) and show that exposure to economic downturns makes people more risk averse and more efficiency-focused, respectively; while Eckel, El-Gamal, andWilson (2009), Cameron andShah (2013), and Hanaoka, Shigeoka, and Watanabe (2015) estimate the impact of natural disasters on individual risk preferences (and arrive at different conclusions). As discussed above, several papers (cf.…”