DP7999 Childhood Determinants of Risk Aversion: The Long Shadow of Compulsory Education
|Author(s):||Dmytro Hryshko, Maria Jose Luengo-Prado, Bent E Sørensen|
|Publication Date:||September 2010|
|Keyword(s):||high school movement, intergenerational transmission|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=7999|
We study the determinants of individual attitudes towards risk and, in particular, why some individuals exhibit extremely high risk aversion. Using data from the Panel Study of Income Dynamics we find that a policy induced increase in high school graduation rates leads 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.