Schooling and small stakes risk aversion: Insights from a rural-poor community

Adnan Fakir

Economics Letters, 2021, vol. 207, issue C

Abstract: A risk experiment is conducted with 900 rural-poor subjects from Bangladesh to test the empirical basis for Rabin (2000)’s critique. By varying lab wealth within-subjects, this study provides additional evidence on whether subjects appear to be too risk-averse with regard to small-stakes gambles. I find risk aversion for low levels of lab wealth and insignificant distinction of risk aversion for high levels of lab wealth. Segregating the sample by schooling, while subjects with no schooling exhibited moderate levels of risk aversion throughout the experiment range, subjects with some formal schooling exhibited risk neutrality (or preference) for high levels of lab wealth. The latter result rejects the empirical basis for the critique. The findings stress the importance to better understand diverse risk attitudes to predict behavioral responses to interventions adequately.

Keywords: Risk aversion; Expected utility; Rabin critique; Risk experiment; Bangladesh (search for similar items in EconPapers)
JEL-codes: C93 D03 D81 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:207:y:2021:i:c:s0165176521003177

DOI: 10.1016/j.econlet.2021.110040

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