Environmental Adaptation of Risk Preferences

Salvatore Di Falco and Ferdinand M Vieider

The Economic Journal, 2022, vol. 132, issue 648, 2737-2766

Abstract: We present incentivised panel data measuring risk preferences of subsistence farmers from across Ethiopia and pair them with rainfall data. We use these data to test the hypothesis that risk preferences may adapt to the environment of the decision maker. We find that rainfall shocks decrease risk tolerance for the same individuals over time. We also find that historical rainfall characteristics and geographical features can explain 40% of the variation in preferences across individuals. The time-changing effects are perfectly aligned with the geographical effects we document, painting a unified and highly coherent picture. This provides the first real-world evidence that preferences may systematically adapt to the environment of the decision maker.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1093/ej/ueac030 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:econjl:v:132:y:2022:i:648:p:2737-2766.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Economic Journal is currently edited by Francesco Lippi

More articles in The Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press () and ().