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Risk-Taking Behavior in the Wake of Natural Disasters

Lisa Cameron () and Manisha Shah ()

Journal of Human Resources, 2015, vol. 50, issue 2, 484-515

Abstract: We investigate whether experiencing a natural disaster affects risk-taking behavior. We conduct standard risk games (using real money) with randomly selected individuals in rural Indonesia. We find that individuals who recently suffered a flood or earthquake exhibit more risk-aversion. Experiencing a natural disaster causes people to perceive that they now face a greater risk of a future disaster. We conclude that this change in perception of background risk causes people to take fewer risks. We provide evidence that experimental risk behavior is correlated with real-life risk behavior, highlighting the importance of our results.

Date: 2015
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Related works:
Working Paper: Risk-Taking Behavior in the Wake of Natural Disasters (2013) Downloads
Working Paper: Risk-Taking Behavior in the Wake of Natural Disasters (2012) Downloads
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