Risk and Time Preferences: Experimental and Household Survey Data from Vietnam
36 Pages Posted: 21 Jan 2006
We conducted experiments in Vietnamese villages to investigate how wealth, political history, occupation, and other demographic variables (taken from a comprehensive earlier household survey) are correlated with risk and time discounting measured in experiments. Experimental results show that in villages with higher mean income, people are less loss-averse and more patient. Villagers in the north who had worked on collective farms and received food from the government on a regular basis are less averse to loss.
We expand measurements of risk and time preferences beyond expected utility and exponential discounting, replacing those simple approximations with prospect theory and a three-parameter hyperbolic discounting model.
Keywords: Prospect theory, Time discounting, Field experiment
JEL Classification: C93, D81
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