Measuring Risk Aversion Among the Urban Poor in Kolkata, India

30 Pages Posted: 8 Nov 2011  

Joseph H. Cook

University of Washington - Daniel J. Evans School of Public Affairs

Susmita Chatterjee

affiliation not provided to SSRN

Dipika Sur

affiliation not provided to SSRN

Dale Whittington

University of North Carolina (UNC) at Chapel Hill - Department of Environmental Sciences and Engineering

Date Written: October 1, 2011

Abstract

We examine risk preferences in an urban setting in a low-income developing country with non- student subjects by adapting the experimental approach of Holt and Laury (2002). We conducted 22 group experiments (n= 404) and used in-kind payoffs. The average midpoint of the CRRA intervals among participants was 0.53, or “risk-averse”, roughly in line with most similar studies in poor countries. Like most studies, we find weak correlations between risk aversion most socioeconomic characteristics. Importantly, a sizeable minority had difficulty understanding the experiment, and participants were influenced by the context in which the experiments occurred. These problems are not unique to our study, however, and our paper adds to a growing literature that suggests that risk aversion elicitation approaches are sensitive to context and the abilities of participants. Many experimental risk studies, however, are designed to make it difficult or impossible to detect if participants are confused.

Keywords: risk aversion, risk preferences, India, developing countries, urban, experiment

Suggested Citation

Cook, Joseph H. and Chatterjee, Susmita and Sur, Dipika and Whittington, Dale, Measuring Risk Aversion Among the Urban Poor in Kolkata, India (October 1, 2011). Available at SSRN: https://ssrn.com/abstract=1956178 or http://dx.doi.org/10.2139/ssrn.1956178

Joseph H. Cook (Contact Author)

University of Washington - Daniel J. Evans School of Public Affairs ( email )

Seattle, WA 98125
United States

Susmita Chatterjee

affiliation not provided to SSRN ( email )

Dipika Sur

affiliation not provided to SSRN ( email )

Dale Whittington

University of North Carolina (UNC) at Chapel Hill - Department of Environmental Sciences and Engineering ( email )

United States
919-966-7645 (Phone)

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