Income in Jeopardy: How Losing Employment Affects the Willingness to Take Risks

Clemens Hetschko and Malte Preuss

No 813, SOEPpapers on Multidisciplinary Panel Data Research from DIW Berlin, The German Socio-Economic Panel (SOEP)

Abstract: Using German panel data, we assess the causal effect of job loss, and thus of an extensive income shock, on risk attitude. In line with predictions of expected utility reasoning about absolute risk aversion, losing one’s job reduces the willingness to take risks. This effect strengthens in previous hourly wage, begins to manifest itself as soon as an employee perceives the threat of job loss and is of a transitory nature. The change in stated risk attitude matches observable job finding behaviour, confirming the behavioural validity of our results.

Keywords: absolute risk aversion; income shock; job loss; plant closure; general risk attitude (search for similar items in EconPapers)
JEL-codes: D81 J64 J65 (search for similar items in EconPapers)
Pages: 31 p.
Date: 2015
New Economics Papers: this item is included in nep-lab and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.524928.de/diw_sp0813.pdf (application/pdf)

Related works:
Journal Article: Income in jeopardy: How losing employment affects the willingness to take risks (2020)
Working Paper: Income in Jeopardy: How Losing Employment Affects the Willingness to Take Risks (2016)
Working Paper: Income in Jeopardy: How losing employment affects the willingness to take risks (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwsop:diw_sp813

Access Statistics for this paper

More papers in SOEPpapers on Multidisciplinary Panel Data Research from DIW Berlin, The German Socio-Economic Panel (SOEP) Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().