Long-Term Consequences of Growing up in a Recession on Risk Preferences

Hitoshi Shigeoka

No 26352, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Risk preferences play a fundamental role in individuals’ economic decision-making. We examine whether the historical macroeconomic environment shapes individuals’ willingness to take risks. Using nationally representative samples from Japan and exploiting regional variation in economic conditions, we find that men who experienced severe economic conditions in youth are more risk averse in adulthood and the effect is long-lasting. In addition, those men are less likely to be self-employed and they have longer tenure, which are consistent with elevated risk aversion. This study highlights the importance of experience at a critical period of life on the formation of risk preferences.

JEL-codes: D81 J24 Z13 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-lma, nep-neu and nep-upt
Note: AG LS PE POL
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Citations: View citations in EconPapers (14)

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