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Growth, entrepreneurship, and risk-tolerance: a risk-income paradox

Ranoua Bouchouicha () and Ferdinand M. Vieider ()
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Ranoua Bouchouicha: University of Reading
Ferdinand M. Vieider: Ghent University

Journal of Economic Growth, 2019, vol. 24, issue 3, 257-282

Abstract: Abstract Recent papers have modeled the prevalence of risk-tolerance as shaped by growth, making testable predictions about the distribution of risk-tolerance across the globe. We test these predictions using a dataset containing a survey question capturing people’s risk-tolerance for representative samples from 78 countries. We find a negative between-country correlation between risk-tolerance and GDP per capita. Together with the positive within-country correlation between risk-tolerance and income, this results in a risk-income paradox. We further find a negative interaction effect of risk-tolerance and GDP on fertility. These findings provide support for endogenous-preference models of economic growth.

Keywords: Risk-tolerance; Development; Growth; Risk-income paradox (search for similar items in EconPapers)
JEL-codes: D01 D03 D81 E03 O10 (search for similar items in EconPapers)
Date: 2019
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