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On a Simple Survey Measure of Individual Risk Aversion

Joop Hartog (), Ada Ferrer-i-Carbonell and Nicole Jonker
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Joop Hartog: University of Amsterdam

No 00-074/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We ask individuals for their reservation price of a specified lotteryand deduce their Arrow-Pratt measure of risk aversion.This allows direct testing of common hypotheses on risk attitudes inthree datasets. We find that risk aversion indeed fallswith income and wealth. Entrepreneurs are less risk averse thanemployees, civil servants are more risk averse thanprivate sector employees, and women are more risk averse than men. Weanalyze six different specifications of the lotteryquestion in a single data set and find quite consistent results. Weconclude that a simple lottery question is a promisingsurvey instrument to extract differences in risk attitudes amongindividuals.

JEL-codes: D81 C81 (search for similar items in EconPapers)
Date: 2000-08-29
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