The impact of violence on individual risk preferences: evidence from a natural experiment

Pamela Jakiela and Owen Ozier

No 7440, Policy Research Working Paper Series from The World Bank

Abstract: This study estimates the impact of Kenya?s post-election violence on individual risk preferences. Because the crisis interrupted a longitudinal survey of more than five thousand Kenyan youth, this timing creates plausibly exogenous variation in exposure to civil conflict by the time of the survey. The study measures individual risk preferences using hypothetical lottery choice questions, which are validated by showing that they predict migration and entrepreneurship in the cross-section. The results indicate that the post-election violence sharply increased individual risk aversion. Immediately after the crisis, the fraction of subjects who are classified as either risk neutral or risk loving dropped by roughly 26 percent. The findings remain robust to an IV estimation strategy that exploits random assignment of respondents to waves of surveying.

Keywords: Economic Theory&Research; Banks&Banking Reform; Statistical&Mathematical Sciences; Labor Policies; Hazard Risk Management (search for similar items in EconPapers)
Date: 2015-10-14
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: The Impact of Violence on Individual Risk Preferences: Evidence from a Natural Experiment (2019)
Working Paper: The Impact of Violence on Individual Risk Preferences: Evidence from a Natural Experiment (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:7440

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