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Climatic Roots of Loss Aversion

Oded Galor () and Viacheslav Savitskiy ()
Additional contact information
Viacheslav Savitskiy: Brown University

No 11816, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This research explores the origins of loss aversion and the variation in its prevalence across regions, nations and ethnic group. It advances the hypothesis and establishes empirically that the evolution of loss aversion in the course of human history can be traced to the adaptation of individuals to the asymmetric effects of climatic shocks on reproductive success during the Malthusian epoch in which subsistence consumption was a binding constraint. Exploiting regional variations in the vulnerability to climatic shocks and their exogenous changes in the course of the Columbian Exchange, the research establishes that consistent with the predictions of the theory, individuals and ethnic groups that are originated in regions marked by greater climatic volatility have higher predisposition towards loss-neutrality, while descendants of regions in which climatic conditions tended to be spatially correlated, and thus shocks were aggregate in nature, are characterized by greater intensity of loss aversion.

Keywords: loss aversion; cultural evolution; evolution of preferences; natural selection; Malthusian epoch; growth; development (search for similar items in EconPapers)
JEL-codes: D81 D91 Z10 O10 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-evo, nep-gro and nep-upt
Date: 2018-09
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Related works:
Working Paper: Climatic Roots of Loss Aversion (2018) Downloads
Working Paper: Climatic Roots of Loss Aversion (2018) Downloads
Working Paper: Climatic Roots of Loss Aversion (2018) Downloads
Working Paper: Climatic Roots of Loss Aversion (2018) Downloads
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