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Time-stability of risk preferences: A new approach with evidence from developed and developing countries

Nicolas Salamanca, Buly Cardak, Edwin Ip and Joe Vecci
Additional contact information
Edwin Ip: Department of Economics, University of Exeter
Joe Vecci: Department of Economics, University of Gothenburg

No 2305, Discussion Papers from University of Exeter, Department of Economics

Abstract: Time-stability of preferences is a crucial assumption in economics. We develop a novel test-retest method to examine the stability of risk preferences over time, while quantifying the importance of both idiosyncratic shocks and measurement error. Using eight large, representative datasets from developing and developed countries, we find risk preferences to be unstable in developing countries. In contrast, they are very stable in developed countries, except for low-income individuals in the U.S.. We discuss the important implications of these findings for policies and research.

Keywords: risk preferences; stability; economic development (search for similar items in EconPapers)
JEL-codes: C18 D01 D81 O10 (search for similar items in EconPapers)
Date: 2023-04-17
New Economics Papers: this item is included in nep-rmg and nep-upt
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Citations: View citations in EconPapers (1)

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