Open AccessChildhood determinants of risk aversion: The long shadow of compulsory education
Author(s) -
Hryshko Dmytro,
LuengoPrado María José,
Sørensen Bent E.
Publication year - 2011
Publication title -
quantitative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.062
H-Index - 27
eISSN - 1759-7331
pISSN - 1759-7323
DOI - 10.3982/qe2
Subject(s) - risk aversion (psychology) , economics , panel study of income dynamics , graduation (instrument) , volatility (finance) , panel data , demographic economics , shadow (psychology) , psychology , econometrics , financial economics , expected utility hypothesis , geometry , mathematics , psychotherapist
We study the determinants of individual attitudes toward risk and, in particular, why some individuals exhibit extremely high risk aversion. Using data from the Panel Study of Income Dynamics, we find that policy induced increases in high school graduation rates lead to significantly fewer individuals being highly risk averse in the next generation. Other significant determinants of risk aversion are age, sex, and parents' risk aversion. We verify that risk aversion matters for economic behavior in that it predicts individuals' volatility of income.