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On A Simple Survey Measure Of Individual Risk Aversion

Joop Hartog
University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)

Ada Ferrer-i-Carbonell
Faculty of Economics and Econometrics (SCHOLAR) & AIAS; Tinbergen Institute

Nicole Jonker
De Nederlandsche Bank (DNB)

November 2000

CESifo Working Paper Series No. 363

Abstract:
We ask individuals for their reservation price of a specified lottery and deduce their Arrow-Pratt measure of risk aversion. This allows direct testing of common hypotheses on risk attitudes in three datasets. We find that risk aversion indeed falls with income and wealth. Entrepreneurs are less risk averse than employees, civil servants are more risk averse than private sector employees, and women are more risk averse than men. We analyze six different specifications of the lottery question in a single data set and find quite consistent results. We conclude that a simple lottery question is a promising survey instrument to extract differences in risk attitudes among individuals.

JEL Classifications: D81, C81

Working Paper Series

Date posted: February 20, 2001 ; Last revised: August 11, 2004

Suggested Citation

Hartog, Joop, Ferrer-i-Carbonell, Ada and Jonker, Nicole, On A Simple Survey Measure Of Individual Risk Aversion (November 2000). CESifo Working Paper Series No. 363. Available at SSRN: http://ssrn.com/abstract=260938

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Contact Information

Joop Hartog (Contact Author) University of Amsterdam - Faculty of Economics and Business (FEB) ( email ) Roetersstraat 11 1018 WB Amsterdam Netherlands
Tinbergen Institute Burg. Oudlaan 50 Rotterdam 3062 PA Netherlands
CESifo (Center for Economic Studies and Ifo Institute for Economic Research) Poschinger Str. 5 DE-81679 Munich Germany
Institute for the Study of Labor (IZA) P.O. Box 7240 D-53072 Bonn Germany
Ada Ferrer-i-Carbonell Faculty of Economics and Econometrics (SCHOLAR) & AIAS ( email ) Plantage Muidergracht 4 Amsterdam 1018 TV Netherlands 31-20-525 6137 (Phone) HOME PAGE: http://www.uva-aias.net/staff.asp?id=71&lang=ne
Tinbergen Institute Netherlands
Nicole Jonker De Nederlandsche Bank (DNB) ( email ) P.O. Box 98 Amsterdam 1000 AB Netherlands

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