All Over the Map: Heterogeneity of Risk Preferences across Individuals, Prospects, and Countries

Olivier L'Haridon and Ferdinand Vieider ()

No em-dp2016-04, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: We analyze the risk preferences of 2939 subjects across 30 countries on all continents. Using structural modeling, we explore heterogeneity in risk preferences across three dimensions: i) between individuals; ii) between prospects; and iii) between countries. Preferences in non-Western countries differ systematically from those found inWestern countries, hitherto considered universal. Reference-dependence and likelihood-dependence are both found to play a role in describing preferences. While we confirm previous results on individual characteristics explaining little of overall preference heterogeneity, between countries a few macroeconomic indicators can explain a considerable part of the heterogeneity. The heterogeneity explained furthermore differs across decision parameters, being low for pure risk aversion measures, but higher for measures of noise and for rationality parameters.

Keywords: risk preferences; heterogeneity (search for similar items in EconPapers)
JEL-codes: C93 D03 D80 O12 (search for similar items in EconPapers)
Pages: 113 pages
Date: 2016-04-18
New Economics Papers: this item is included in nep-exp and nep-upt
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Citations: View citations in EconPapers (5)

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