The heritability of economic preferences

Abstract

We investigate the heritability of risk, uncertainty, and time preferences using a large-scale field experiment with adult twins, complemented by a comprehensive meta-analysis of prior studies. Our research introduces a novel empirical approach that integrates behavioral genetics with structural econometrics, enabling us to directly quantify the heritability of economic preference parameters, without relying on proxy measures. Our incentive-compatible experiment is the first to simultaneously elicit all three types of preferences within the same individuals in a twin study. Our findings reveal a stronger genetic influence on risk and uncertainty preferences than previously reported. We demonstrate that conventional proxy measures for preferences and simplified structural models tend to overstate the influence of unique environmental factors, highlighting the need for more nuanced methodological approaches.

Keywords: risk preferences, ambiguity aversion, time preferences, twin study, genetics

JEL Classification: C93, D15, D81, D91, Z13