School Environment and Risk Preferences: Experimental Evidence

46 Pages Posted: 13 Jul 2011 Last revised: 13 Jun 2014

Catherine C. Eckel

Texas A&M University

Philip J. Grossman

Monash University - Department of Economics

Cathleen A. Johnson

University of Arizona, Philosophy, Politics, Economics and Law Program; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Angela C. M. de Oliveira

University of Massachusetts Amherst

Christian Rojas

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics

Rick K. Wilson

Rice University - Department of Political Science

Date Written: October 1, 2012

Abstract

Using a field experiment eliciting the risk preferences of 490 9th and 11th grade students from a variety of school environments, we examine various factors influencing the development of these risk preferences. In addition to factors previously considered by economists (gender, ethnicity, height, and parental education) we also evaluate cognitive (proxied by math literacy) and emotional (proxied by patience and planning ability) development theories. There is substantially stronger support for the variables typically considered by economists; consistent with prior work we find that girls are more risk averse while tall and nonwhites individuals are more risk tolerant. Next, the impact of school characteristics on the development of risk preferences is examined. Two effects emerge: a peer effect and a quality effect. For the peer effect, individuals who are in a school with a higher percentage of students on free or reduced lunches are significantly more risk averse than those with a lower percentage of students from low-income families. For the quality effect, individuals in schools that have smaller class sizes and a higher percentage of educators with advanced degrees have more moderate levels of risk aversion. Further, school characteristics only influence the 11th graders in the sample-lending some support to a causal argument.

Keywords: Risk preference, Field experiment, Teen

JEL Classification: C93, D81

Suggested Citation

Eckel, Catherine C. and Grossman, Philip J. and Johnson, Cathleen A. and de Oliveira, Angela C. M. and Rojas, Christian and Wilson, Rick K., School Environment and Risk Preferences: Experimental Evidence (October 1, 2012). Journal of Risk and Uncertainty, Vol. 45, No. 3, 2012. Available at SSRN: https://ssrn.com/abstract=1883770 or http://dx.doi.org/10.2139/ssrn.1883770

Catherine C. Eckel (Contact Author)

Texas A&M University ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

Philip J. Grossman

Monash University - Department of Economics ( email )

Wellington Road
Clayton, 3800
Australia
61399020052 (Phone)

Cathleen Amanda Johnson

University of Arizona, Philosophy, Politics, Economics and Law Program ( email )

Social and Behavioral Sciences
Tucson, AZ 85721-0108
United States

Center for Interuniversity Research and Analysis on Organization (CIRANO)

Montreal, Quebec H3C 3J7
Canada

Angela C. M. De Oliveira

University of Massachusetts Amherst ( email )

Department of Operations and Information Managemen
Amherst, MA 01003
United States

HOME PAGE: http://www.umass.edu/resec/faculty/deoliveira/index.shtml

Christian Rojas

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics ( email )

Stockbridge Hall
80 Campus Center Way
Amherst, MA 01003-9246
United States

Rick K. Wilson

Rice University - Department of Political Science ( email )

Houston, TX 77005-1892
United States

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