Peer Effects in Risk Aversion

27 Pages Posted: 24 Jul 2013

See all articles by Ana Ines Balsa

Ana Ines Balsa

Universidad de Montevideo

Nestor Gandelman

Universidad ORT Uruguay

Nicolas Gonzalez

Centre for Monetary and Financial Studies (CEMFI)

Date Written: December 2012

Abstract

Using data on Uruguayan adolescents, we estimate peer effects in risk attitudes. Relative risk aversion is elicited in an experimental setting. Identification is based on parents not being able to choose the class within the school of their choice. After controlling for school-grade fixed effect and addressing endogeneity due to simultaneity, we find a significant and quantitative large impact of peers on individuals risk aversion. An increase in one standard deviation of the group risk aversion produces an increase in 44-64% on an individual risk aversion. These findings enhance the importance of multiplicative effects related to risk behavior.

Keywords: risk aversion, peer effects, instrumental variables

JEL Classification: I12, D1

Suggested Citation

Balsa, Ana Ines and Gandelman, Nestor and Gonzalez, Nicolas, Peer Effects in Risk Aversion (December 2012). Available at SSRN: https://ssrn.com/abstract=2297525 or http://dx.doi.org/10.2139/ssrn.2297525

Ana Ines Balsa

Universidad de Montevideo ( email )

Prudencio de Pena 2440
Montevideo, CP 11600
Uruguay

HOME PAGE: http://www2.um.edu.uy/abalsa/

Nestor Gandelman (Contact Author)

Universidad ORT Uruguay ( email )

Bulevar España 2633
Montevideo, 11.300
Uruguay

Nicolas Gonzalez

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain

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