Risk and Time Preferences: Linking Experimental and Household Survey Data from Vietnam

Abstract

We conducted experiments in Vietnamese villages to determine the predictors of risk and time preferences. In villages with higher mean income, people are less loss-averse and more patient. Household income is correlated with patience but not with risk. We expand measurements of risk and time preferences beyond expected utility and exponential discounting, replacing those models with prospect theory and a three-parameter hyperbolic discounting model. Comparable risk parameter estimates have been found for Chinese farmers, using our method. (C83, D12, O12, P38)

Simultaneous Estimation of Risk and Time Preferences among Small‐scale Cattle Farmers in West Africa

“…Our article is complementary to the recent study of Tanaka, Camerer and Nguyen (2010) who conducted risk and time experiments with rural villagers in Vietnam and found that wealthier villagers are less loss averse and more patient.…”

“…Most of these studies were carried out in developed countries, e.g. Denmark (Andersen et al 2008) or Japan (Ida and Goto 2009). One study that jointly explores risk and time preferences carried out in the developing world is that of Tanaka, Camerer and Nguyen (2010), who conducted experiments with rural villagers in Vietnam. They expanded the measurements of risk preferences beyond the concavity of the utility function and incorporated gains and losses through employing prospect theory (Kahneman & Tversky 1979;Tversky & Kahneman 1992).…”

“…They expanded the measurements of risk preferences beyond the concavity of the utility function and incorporated gains and losses through employing prospect theory (Kahneman & Tversky 1979;Tversky & Kahneman 1992). In their time discounting model Tanaka, Camerer and Nguyen (2010) use a generalized function that nests hyperbolic and exponential specifications as recommended by Benhabib, Bisin and Schotter (2010). In a cross-sectional study, in order to infer causality from correlation between observed behavior in the experiments and outcomes from real world decision behavior observed in the living standard survey Tanaka, Camerer and Nguyen (2010) applied an instrumental variable approach.…”

“…In their time discounting model Tanaka, Camerer and Nguyen (2010) use a generalized function that nests hyperbolic and exponential specifications as recommended by Benhabib, Bisin and Schotter (2010). In a cross-sectional study, in order to infer causality from correlation between observed behavior in the experiments and outcomes from real world decision behavior observed in the living standard survey Tanaka, Camerer and Nguyen (2010) applied an instrumental variable approach. Their results show that subjects from wealthy villages were likely to be less risk averse towards gains and losses.…”

Microfoundations of social capital

“…Only 3 percent of participants chose not to answer at least one of the questions. 12 The risk aversion elicitation task was a modified version of the one used in Tanaka, Camerer and Nguyen (2010). Subjects were presented with a list of 10 choices between two lotteries.…”