Risk Attitudes and Well-being in Latin America

Juan-Camilo Cardenas and Jeffrey Carpenter

No 7718, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: A common premise in both the theoretical and policy literature on development is that people remain poor because they are too impatient to save and too risk averse to take the sort of chances needed to accumulate wealth. The empirical literature, however, suggests that this assumption is far from proven. We report on field experiments designed to address many of the problems confounding previous analyses of the links between risk preferences and well-being. Our sample includes more than 3,000 participants who were drawn representatively from six Latin American cities: Bogotá, Buenos Aries, Caracas, Lima, Montevideo, San José. In addition to the experiment which reveals interestingcross-country differences, participants completed an extensive survey that provides data on a variety of well-being indicators and a number of important controls. Focusing on risk preferences, we find little evidence of robust links between risk aversion and wellbeing. However, when we analyze the results of three treatments that add elements of reality to the decision problem, we see that these, more subtle, instruments correlate better with well-being, even after controlling for a variety of other important factors like the accumulation of human capital and access to credit.

Keywords: risk aversion; ambiguity aversion; loss aversion; risk pooling; well-being; Latin America (search for similar items in EconPapers)
JEL-codes: C91 C93 D03 D81 O12 (search for similar items in EconPapers)
Pages: 40
Date: 2010-11-22
New Economics Papers: this item is included in nep-exp, nep-hap and nep-lam
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Risk Attitudes and Well-Being in Latin America (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:007718

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