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The Relationship between Cognitive Ability and Risk Preferences in a Developing Nation: Findings from the Field

Ali Moghaddasi Kelishomi and Daniel Sgroi

No 15266, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We find a strong relationship between risk-loving preferences and cognitive ability which becomes stronger as adherence to the generalized axiom of revealed preference (a proxy for rationality) increases. Our results are taken from a field study of individuals at the very bottom of the income distribution in a developing nation. Our results for some of the poorest in the world support recent findings drawn from subjects in wealthy Western nations, suggesting there may be a stable relationship between risk preferences and cognitive ability for the human population as a whole irrespective of socio-economic status.

Keywords: risk; cognitive ability; rationality; generalized axiom of revealed preference; field experiment; low incomes; developing nation (search for similar items in EconPapers)
JEL-codes: C93 D03 I11 I12 I18 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2022-04
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-neu and nep-upt
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