Cognitive Skills, Gender and Risk Preferences

29 Pages Posted: 17 Nov 2012

See all articles by Alison L. Booth

Alison L. Booth

Australian National University (ANU) - Research School of Social Sciences (RSSS); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Pamela Katic

Australian National University (ANU)

Abstract

In this paper we utilise data from a unique new birth‐cohort study to see how the risk preferences of young people are affected by cognitive skills and gender. We find that cognitive ability (measured by the percentile ranking for university entrance at age 18) has no effect on risk preferences measured at age 20. This is in contrast to experimental studies that use IQ measures to proxy cognitive skills. However we do find that gender matters. While young women are significantly more likely than young men to assess themselves as being prepared to take risks, women choose to invest significantly less when they are confronted with a clearly specified investment decision based on hypothetical lottery winnings. This difference between the impact of gender on risk attitudes and the hypothetical lottery investment suggests that impatience and framing affect young women and men differently.

Keywords: cognitive ability, risk preferences, risk attitudes, gender

JEL Classification: D01, D80, J16, J24

Suggested Citation

Booth, Alison L. and Katic, Pamela, Cognitive Skills, Gender and Risk Preferences. IZA Discussion Paper No. 6997, Available at SSRN: https://ssrn.com/abstract=2177195

Alison L. Booth (Contact Author)

Australian National University (ANU) - Research School of Social Sciences (RSSS) ( email )

Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 3285 (Phone)
+61 2 6125 0182 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Pamela Katic

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

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