Are the Disabled Less Loss Averse? Evidence from a Natural Policy Experiment
28 Pages Posted: 26 Feb 2016
Date Written: April 2016
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 decision‐making among the physically disabled.
JEL Classification: D03, C9, R38
Suggested Citation: Suggested Citation