On a Simple Survey Measure of Individual Risk Aversion

30 Pages Posted: 20 Feb 2001

See all articles by Joop Hartog

Joop Hartog

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Ada Ferrer-i-Carbonell

Institut d'Anàlisi Econòmica (IAE-CSIC), Barcelona

Nicole Jonker

De Nederlandsche Bank (DNB); De Nederlandsche Bank

Date Written: November 2000

Abstract

We ask individuals for their reservation price of a specified lottery and deduce their Arrow-Pratt measure of risk aversion. This allows direct testing of common hypotheses on risk attitudes in three datasets. We find that risk aversion indeed falls with income and wealth. Entrepreneurs are less risk averse than employees, civil servants are more risk averse than private sector employees, and women are more risk averse than men. We analyze six different specifications of the lottery question in a single data set and find quite consistent results. We conclude that a simple lottery question is a promising survey instrument to extract differences in risk attitudes among individuals.

JEL Classification: D81, C81

Suggested Citation

Hartog, Joop and Ferrer-i-Carbonell, Ada and Jonker, Nicole, On a Simple Survey Measure of Individual Risk Aversion (November 2000). CESifo Working Paper Series No. 363. Available at SSRN: https://ssrn.com/abstract=260938

Joop Hartog (Contact Author)

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

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

Ada Ferrer-i-Carbonell

Institut d'Anàlisi Econòmica (IAE-CSIC), Barcelona ( email )

Barcelona, Bellaterra 08193
Spain

Nicole Jonker

De Nederlandsche Bank (DNB) ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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