Scared Straight or Scared to Death? The Effect of Risk Beliefs on Risky Behaviors

Abstract

This paper tests a model of risk compensation that allows for “fatalism”: higher risks lead to more risk-taking, rather than less. Fatalism can be rational if the risk of each act exceeds a threshold value. I test this prediction by randomizing the provision of information about HIV risks in Malawi, and break down the risk elasticity of sexual risk-taking by people’s initial risk beliefs. Matching the model’s predictions, this elasticity varies from -2.3 for the lowest to 2.9 for the highest beliefs. Fatalism is more pronounced among people who think they may be HIV-positive, consistent with the model’s mechanism.

Keywords: Risk Compensation, Economic Epidemiology, Health Economics, HIV/AIDS, Development Economics

JEL Classification: I12, I15, J10, O12