Determinants of Risk Aversion Over Time: Experimental Evidence from Rural Thailand

58 Pages Posted: 30 May 2016

See all articles by Lukas Menkhoff

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin - Faculty of Economics

Sahra Sakha

Deutsche Bundesbank; German Institute of Economic Research

Date Written: May 2016

Abstract

We use a repeated incentivized risk experiment in rural Thailand to test determinants of changes in the level of individual risk aversion over time. We find that risk aversion significantly changes between 2008 and 2013 as a result of macro- and micro-level shocks. Strong macroeconomic recovery following the 2007/08 financial crisis makes people more risk-seeking, whereas macroeconomic normalization thereafter increases risk aversion parameters. On the micro-level, we observe that negative economic and agricultural shocks increase risk aversion. Subjective perceptions of well-being and expectations also play a role but do not drive the macro-micro determinants of changes in individual risk aversion.

Keywords: risk aversion, lab-in-the-field experiment, shocks, socio-economic determinants

JEL Classification: D01, D81, O12

Suggested Citation

Menkhoff, Lukas and Sakha, Sahra, Determinants of Risk Aversion Over Time: Experimental Evidence from Rural Thailand (May 2016). DIW Berlin Discussion Paper No. 1582. Available at SSRN: https://ssrn.com/abstract=2785467 or http://dx.doi.org/10.2139/ssrn.2785467

Lukas Menkhoff (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

Sahra Sakha

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt/Main D-60431
Germany

German Institute of Economic Research ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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