Are Risk Aversion and Impatience Related to Cognitive Ability?Thomas Dohmen (), Armin Falk (), David Huffman () and Uwe Sunde No 6852, CEPR Discussion Papers from C.E.P.R. Discussion Papers Abstract: Is the way that people make risky choices, or tradeoffs over time, related to cognitive ability? This paper investigates whether there is a link between cognitive ability, risk aversion, and impatience, using a representative sample of the population and incentive compatible measures. We conduct choice experiments measuring risk aversion, and impatience over an annual time horizon, for a randomly drawn sample of roughly 1,000 German adults. Subjects also take part in two different tests of cognitive ability, which correspond to sub-modules of one of the most widely used IQ tests. Interviews are conducted in subjects' own homes. We find that lower cognitive ability is associated with greater risk aversion, and more pronounced impatience. These relationships are significant, and robust to controlling for personal characteristics, educational attainment, income, and measures of credit constraints. We perform a series of additional robustness checks, which help rule out other possible confounds. Keywords: Cognitive Ability; Field Experiment; Risk Preference; Time Preference (search for similar items in EconPapers) Downloads: (external link) Related works: Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers |
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