Are the Disabled Less Loss Averse? Evidence from a Natural Policy Experiment

28 Pages Posted: 26 Feb 2016

See all articles by Yuval Arbel

Yuval Arbel

Carmel Academic Center

Danny Ben-Shahar

Tel Aviv University

Stuart Gabriel

University of California, Los Angeles (UCLA)

Date Written: April 2016

Abstract

Research findings show that disabled persons often develop physical and psychological mechanisms to compensate for disabilities. Coping mechanisms may not be limited to the psychophysiological domain and may extend to cognitive bias and loss aversion. In this study, we apply unique microdata from a natural policy experiment to assess the role of loss aversion in home purchase among nondisabled and disabled households. Results of survival analysis indicate that the physically disabled are substantially less loss averse in home purchase. Furthermore, loss aversion varies with other population characteristics and attenuates with degree of disability. Findings provide new evidence of diminished cognitive bias and more rational economic decisionā€making among the physically disabled.

JEL Classification: D03, C9, R38

Suggested Citation

Arbel, Yuval and Ben-Shahar, Danny and Gabriel, Stuart, Are the Disabled Less Loss Averse? Evidence from a Natural Policy Experiment (April 2016). Economic Inquiry, Vol. 54, Issue 2, pp. 1291-1318, 2016, Available at SSRN: https://ssrn.com/abstract=2738293 or http://dx.doi.org/10.1111/ecin.12306

Yuval Arbel (Contact Author)

Carmel Academic Center ( email )

4 Shaar Palmer Street
Haifa
Israel

Danny Ben-Shahar

Tel Aviv University ( email )

Tel Aviv
Israel

Stuart Gabriel

University of California, Los Angeles (UCLA) ( email )

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