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Risk-Taking Behavior in the Wake of Natural Disasters

Lisa Cameron () and Manisha Shah ()

No 19534, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D81 O12 Q54 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-exp and nep-sea
Note: DEV EEE
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Published as Lisa Cameron & Manisha Shah, 2015. "Risk-Taking Behavior in the Wake of Natural Disasters," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 484-515.

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