Mobility, risk tolerance and competence to manage risks

Abstract

Migration is a risky behaviour because of uncertainty about future wages, living conditions, changing relationships with family and friends and cultural adjustment. Migration researchers recognize the importance of risk and uncertainty but mostly have approached this as a form of 'rational' decision making, rather than in terms of how behavioural economics analyses 'irrational' risky behaviours such as drinking, smoking or participating in dangerous sports. The rationalist approaches explain why some groups of individuals are more likely than others to migrate, but find it difficult to explain individual variations in behaviour within these groups. Individual migrants versus non migrants are self-selected in terms of tolerance of risk and uncertainty but, with very few exceptions, there has been no research on migration within the framework of risk tolerance/aversion and competence to manage risk. Moreover, existing research is based on, and constrained by the limitations of, incumbent data sets. Drawing on a specially commissioned large-scale survey of the UK population, this paper uses principal components and logistic regression to analyse the extent to which risk and risk-related measures can be used to predict four different types of mobility profiles. There is evidence of significant associations with general risk/uncertainty tolerance, and 2 competence-based tolerance. These are strongest in terms of the two most polarised mobility types: the least mobile, the Stayers, and the most mobile, the Roamers.

Risk attitudes and migration

“…This is in line with Hao et al (2014) and the literature cited in Williams and Baláž (2014), but contrasts with Jaeger et al (2010), in which gender had no statistically significant effect on migration. This difference is not easily explained, though it may reflect the different nature of migration captured in this study (temporary migration, predominantly carried out by males) and in theirs (permanent migration, mostly for work or family reasons).…”

“…The underlying hypothesis is that the attitude an individual has towards risk determines relevant outcomes in a variety of contexts like career decisions or the choice of a portfolio of risky investments. There is some evidence supporting that risk aversion is individual-specific (Williams and Baláž, 2014;Guiso and Paiella, 2006). Models developed outside the expected utility theory also support this hypothesis and provide additional empirical support (Czaika, 2012).…”

“…To date, there is only limited empirical evidence verifying this hypothesis, and such evidence is gathered from either laboratory experiments or data predominantly collected in high income countries with established institutions (Bonin et al, 2009 and2012;Jaeger et al, 2010;Dohmen et al, 2011 and2012;Williams and Baláž, 2014). Evidence from countries undergoing rapid economic and social transformations is minimal (Gibson and McKenzie, 2009;Hao et al, 2014;Dohmen et al, 2015).…”

Why populations persist: mobility, place attachment and climate change

“…These quotes show how people can be ''trapped'' by themselves from taking actions that may increase their well-being. Attitude to risk, both in general and to migration specifically, has previously been associated with mobility characteristics with the least mobile shown to have a lower risk tolerance (Williams and Baláž 2014).…”

Insurance uptake among small and medium-sized tourism and hospitality enterprises in a resource-scarce environment

“…The expected utility theory (EUT) argues that people try to optimise their expected utility when deciding whether to take an insurance cover. It is obvious that business owners are uncertain about tomorrow's outcomes (Williams & Baláž, 2014), but are aware they will encounter some form of risk and perhaps will be able to evaluate what is risky based on the likelihood of the event and severity in terms of its impact on their current wealth should it occur (Baranoff et al, 2009). Given that the utility of SMTHEs depends on the wealth accumulated from the business and perhaps expected wealth, the topmost goal of every business owner would be to optimise utility from investments made.…”