Environmental Factors Shape Risk Preferences

Ferdinand Vieider, Ghent University

Risk preferences are a key determinant of individual decisions. Such preferences change over time and differ across individuals, but little is known on what shapes them. We present unique incentivized panel data from Ethiopia, and pair them with data on rainfall shocks to address this question. We make three main contributions: 1) we present a model and derive predictions on how preferences change over time and differ across individuals; 2) we draw clear causal inferences on the effects of shocks; 3) we explain a large part of the cross-sectional variation in preferences. By showing how cross-sectional analysis may result in spurious inferences, our results organize the highly contradictory literature on shocks and preferences. By explain- ing over half the variance in idiosyncratic preferences, we challenge the stylized fact that individual heterogeneity in preferences cannot be explained. Overall, the results show the importance of environmental forces in shaping preferences

About the speaker

In October 2018, Ferdinand joined the Department of Economics at Ghent University, Belgium, as a Research Professor in Applied Microeconomics. From August 2015 to September 2018, he held the Chair of Behavioural and Development Economics at the Department of Economics, University of Reading, UK. Before that, he headed the Risk & Development Junior Research Group at the WZB Berlin Social Science Center. He was also an excellence fellow at the University of Munich, and a CNRS researcher at Laboratoire GATE, University of Lyon. He obtained his PhD in economics in 2009 from the Econometric Institute at the Erasmus University Rotterdam and the Tinbergen Institute.

Venue: Conference room (0.16 & 0.17)

Date: 31 January 2019

Time: 12:00 - 13:00