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Prudence and prevention - Empirical evidence*

Thomas Mayrhofer () and Hendrik Schmitz ()
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Thomas Mayrhofer: Stralsund University of Applied Sciences, Harvard Medical School

No 134, Working Papers CIE from Paderborn University, CIE Center for International Economics

Abstract: Theoretical papers show that optimal prevention decisions in the sense of self-protection (i.e., primary prevention) depend not only on the level of (second-order) risk aversion but also on higher-order risk preferences such as prudence (third-order risk aversion). We study empirically whether these theoretical results hold and whether prudent individuals show less preventive (self-protection) effort than non-prudent individuals. We use a unique dataset that combines data on higher-order risk preferences and various measures of observed real-world prevention behavior. We find that prudent individuals indeed invest less in self-protection as measured by influenza vaccination. This result is driven by high risk individuals such as individuals >60 years of age or chronically ill. We do not find a clear empirical relationship between risk-preferences and prevention in the sense of self-insurance (i.e. secondary prevention). Neither risk aversion nor prudence is related to cancer screenings such as mammograms, Pap smears or X-rays of the lung.

Keywords: prudence; risk preferences; prevention; vaccination; screening (search for similar items in EconPapers)
JEL-codes: D12 D81 I12 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2020-08
New Economics Papers: this item is included in nep-rmg and nep-upt
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