Impact of Violent Crime on Risk Aversion: Evidence from the Mexican Drug War

Ryan Brown, Verónica Montalva, Duncan Thomas and Andrea Velasquez
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Verónica Montalva: Inter-American Development Bank
Duncan Thomas: Duke University

The Review of Economics and Statistics, 2019, vol. 101, issue 5, 892-904

Abstract: Whereas attitudes toward risk play an important role in many decisions over the life course, factors that affect those attitudes are not fully understood. Using longitudinal survey data collected in Mexico before and during the Mexican war on drugs, we investigate how risk attitudes change with variation in insecurity and uncertainty brought on by unprecedented changes in local-area violent crime. Exploiting the fact that the timing, virulence, and spatial distribution of changes in violent crime were unanticipated, we establish there is a rise in risk aversion spread across the entire local population as local-area violent crime increases.

Date: 2019
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Working Paper: Impact of Violent Crime on Risk Aversion: Evidence from the Mexican Drug War (2017)
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