Attitudes Towards Risk in the Wake of A Rare Event: Evidence from Pakistan

Posted: 6 Aug 2014

See all articles by Farah Said

Farah Said

Centre for Research in Economics and Business, Lahore School of Economics

Uzma Afzal

University of Nottingham; Lahore School of Economics - Center for Research in Economics and Business

Ginger Turner

World Bank

Date Written: February 2014

Abstract

This paper investigates the impact of rare-event experiences and observations on risk taking. Matching detailed individual, household, and community-level surveys with behavioral games data, we explore the mechanisms that underlie individual risk-taking after a natural disaster. Unlike the existing literature, which focuses mostly on community-level economic and disaster data, our unique dataset allows us to match detailed interviews on individual risk perceptions and loss experiences with game choices. In the context of rural Punjab, Pakistan, we find that having observed others’ losses is as important as personal experience of loss, although the type of loss also matters. In multiple rounds of the game, we also find that the change in strategy between rounds depends on the severity of losses experienced or observed and on the number of floods experienced over one’s lifetime.

Keywords: risk aversion, risk analysis, field experiment, natural disaster, Pakistan floods

JEL Classification: D12, D81, G11, O12

Suggested Citation

Said, Farah and Afzal, Uzma and Turner, Ginger, Attitudes Towards Risk in the Wake of A Rare Event: Evidence from Pakistan (February 2014). Available at SSRN: https://ssrn.com/abstract=2476065

Farah Said (Contact Author)

Centre for Research in Economics and Business, Lahore School of Economics ( email )

Intersection DHA VI and Burki
Burki
Lahore, Punjab 53200
Pakistan

Uzma Afzal

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Lahore School of Economics - Center for Research in Economics and Business ( email )

Intersection Main Boulevard
Phase VI DHA and Burki Road
Burki, Lahore 54000
Pakistan

Ginger Turner

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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