Can public policies change risk preferences? The effect of property titling on risk aversion

Fernando Aragon, Oswaldo Molina and Ingo Outes-Leon ()
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Ingo Outes-Leon: Oxford University

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: Evidence suggests that major events, like war or natural disasters, affect risk preferences. This paper shows that similar effects can also be caused by public policies. Using the case of a large titling program in Peru, we find that this policy reduced risk aversion. The effects are sizeable and seem to be driven by the reduction in background risk associated with improved security of tenure. Our results highlight the potential of public policies to affect human behavior not only by shaping the economic environment, but also by changing individual preferences.

Pages: 21
Date: 2017-06
New Economics Papers: this item is included in nep-ure
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