This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Are Risk Aversion and Impatience Related to Cognitive Ability?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Thomas Dohmen ()
Armin Falk ()
David Huffman ()
Uwe Sunde ()

Additional information is available for the following registered author(s):

Abstract

This paper investigates whether risk aversion and impatience are correlated with cognitive ability. We conduct incentive compatible choice experiments measuring risk aversion, and impatience over an annual time horizon, for a representative sample of roughly 1,000 German adults. A measure of cognitive ability is provided by two submodules of one of the most widely used IQ tests. Interviews are conducted in subjects' own homes. We find that lower cognitive ability is associated with greater risk aversion, and more pronounced impatience. These relationships are statistically and economically significant, and robust to controlling for personal characteristics, educational attainment, income, and measures of liquidity constraints. We perform a series of additional robustness checks, which help rule out other possible confounds.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cesifo.de/DocCIDL/cesifo1_wp2620.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2620.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2009
Date of revision:
Handle: RePEc:ces:ceswps:_2620

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de

For technical questions regarding this item, or to correct its listing, contact: (Julio Saavedra).

Related research
Keywords: risk preference; time preference; cognitive ability; field experiment;

Other versions of this item:

Find related papers by JEL classification:
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December. [Downloadable!]
  2. Hansen, Karsten T. & Heckman, James J. & Mullen, Kathleen J., 2003. "The Effect of Schooling and Ability on Achievement Test Scores," IZA Discussion Papers 826, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "Why the Apple Doesn't Fall Far: Understanding Intergenerational Transmission of Human Capital," American Economic Review, American Economic Association, vol. 95(1), pages 437-449, March. [Downloadable!]
    Other versions:
  4. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December. [Downloadable!] (restricted)
  5. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," IZA Discussion Papers 1730, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Matthew Rabin & Georg Weizsäcker, 2007. "Narrow Bracketing and Dominated Choices," IZA Discussion Papers 3040, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Matthew Rabin., 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Economics Working Papers E00-279, University of California at Berkeley. [Downloadable!]
  9. Kerwin Kofi Charles & Erik Hurst, 2003. "The Correlation of Wealth across Generations," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1155-1182, December. [Downloadable!] (restricted)
    Other versions:
  10. Holger Bonin & Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2006. "Cross-sectional Earnings Risk and Occupational Sorting: The Role of Risk Attitudes," IZA Discussion Papers 1930, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Eric I. Knudsen & James J. Heckman & Judy L. Cameron & Jack P. Shonkoff, 2006. "Economic, Neurobiological and Behavioral Perspectives on Building America's Future Workforce," IZA Discussion Papers 2190, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  12. Borghans Lex & Meijers Huub & Weel Bas ter, 2006. "The Role of Noncognitive Skills in Explaining Cognitive Test Scores," Research Memoranda 006, Maastricht : ROA, Research Centre for Education and the Labour Market. [Downloadable!]
    Other versions:
  13. Samuel Bowles & Herbert Gintis & Melissa Osborne, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December. [Downloadable!] (restricted)
  14. Luigi Guiso & Monica Paiella, 2005. "The Role Of Risk Aversion In Predicting Individual Behavior," Temi di discussione (Economic working papers) 546, Bank of Italy, Economic Research Department. [Downloadable!]
    Other versions:
  15. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," American Economic Review, American Economic Association, vol. 92(5), pages 1606-1617, December. [Downloadable!]
  16. Erik Plug & Wim Vijverberg, 2003. "Schooling, Family Background, and Adoption: Is It Nature or Is It Nurture?," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 611-641, June. [Downloadable!] (restricted)
    Other versions:
  17. Read, Daniel & Loewenstein, George & Rabin, Matthew, 1999. "Choice Bracketing," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 171-97, December. [Downloadable!] (restricted)
  18. Casey B. Mulligan, 1999. "Galton versus the Human Capital Approach to Inheritance," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S184-S224, December. [Downloadable!] (restricted)
  19. Frieder Lang & David Weiss & Andreas Stocker & Bernhard von Rosenbladt, 2007. "Assessing Cognitive Capacities in Computer-Assisted Survey Research: Two Ultra-Short Tests of Intellectual Ability in the German Socio-Economic Panel (SOEP)," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 183-192.
  20. Anders Björklund & Mikael Lindahl & Erik Plug, 2006. "The Origins of Intergenerational Associations: Lessons from Swedish Adoption Data," The Quarterly Journal of Economics, MIT Press, vol. 121(3), pages 999-1028, 08. [Downloadable!] (restricted)
    Other versions:
  21. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," NBER Working Papers 12006, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  22. Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, December. [Downloadable!] (restricted)
    Other versions:
  23. John M. Barron & Mark C. Berger & Dan A. Black, 2006. "Selective Counteroffers," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 385-410, July. [Downloadable!]
  24. David A. Jaeger & Holger Bonin & Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2007. "Direct Evidence on Risk Attitudes and Migration," Working Papers 50, Department of Economics, College of William and Mary. [Downloadable!]
    Other versions:
  25. John T. Warner & Saul Pleeter, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, vol. 91(1), pages 33-53, March. [Downloadable!] (restricted)
  26. Catherine Eckel & Cathleen Johnson & Claude Montmarquette, 2004. "Saving Decisions of the Working Poor: Short-and Long-Term Horizons," CIRANO Working Papers 2004s-45, CIRANO. [Downloadable!]
  27. Luigi Ventura, 2003. "Direct Measures of Time Preference," The Economic and Social Review, Economic and Social Studies, vol. 34(3), pages 293–310. [Downloadable!]
  28. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June. [Downloadable!] (restricted)
  29. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2006. "The Intergenerational Transmission of Risk and Trust Attitudes," IZA Discussion Papers 2380, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  30. Richard J. Murnane & John B. Willett & Frank Levy, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," NBER Working Papers 5076, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  31. Cawley, John & Heckman, James & Vytlacil, Edward, 2001. "Three observations on wages and measured cognitive ability," Labour Economics, Elsevier, vol. 8(4), pages 419-442, September. [Downloadable!] (restricted)
  32. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  33. E. Elisabet Rutstrom & Glenn W. Harrison & Morten I. Lau, 2004. "Estimating Risk Attitudes in Denmark," Econometric Society 2004 Australasian Meetings 201, Econometric Society. [Downloadable!]
  34. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December. [Downloadable!]
  35. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  36. Eric J. Johnson & Simon Gächter & Andreas Herrmann, 2006. "Exploring the Nature of Loss Aversion," IZA Discussion Papers 2015, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  37. Jürgen Schupp & Gert G. Wagner, 2002. "Maintenance of and Innovation in Long-Term Panel Studies: The Case of the German Socio-Economic Panel (GSOEP)," Discussion Papers of DIW Berlin 276, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  38. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier. [Downloadable!] (restricted)
  39. Edwin Leuven & Hessel Oosterbeek & Hans van Ophem, 2004. "Explaining international differences in male skill wage differentials by differences in demand and supply of skill," Economic Journal, Royal Economic Society, vol. 114(495), pages 466-486, 04. [Downloadable!] (restricted)
  40. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February. [Downloadable!] (restricted)
  41. Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutstrom & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," Artefactual Field Experiments 0053, The Field Experiments Website. [Downloadable!]
  42. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April. [Downloadable!] (restricted)
    Other versions:
  43. Lee Lillard & Robert J. Willis, 2001. "Cognition and Wealth: The Importance of Probabilistic Thinking," Working Papers wp007, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  44. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 869-95, October. [Downloadable!] (restricted)
    Other versions:
  45. Carmit Segal, 2006. "Motivation, Test Scores, and Economic Success," Economics Working Papers 1124, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2008. [Downloadable!]
  46. Shiv, Baba & Fedorikhin, Alexander, 1999. " Heart and Mind in Conflict: The Interplay of Affect and Cognition in Consumer Decision Making," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 26(3), pages 278-92, December.
  47. Jason Long & Joseph Ferrie, 2005. "A Tale of Two Labor Markets: Intergenerational Occupational Mobility in Britain and the U.S. Since 1850," NBER Working Papers 11253, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  48. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, 05. [Downloadable!] (restricted)
  49. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
  50. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 41-71, February. [Downloadable!] (restricted)
  51. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
  52. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Department of Economics, Working Paper Series 1034, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Subhasish Dugar & Haimanti Bhattacharya, 2008. "The Power of Reasoning: Experimental Evidence," Working Paper Series, Department of Economics, University of Utah 2008_20, University of Utah, Department of Economics. [Downloadable!]
  2. Oechssler, Jörg & Roider, Andreas & Schmitz, Patrick W., 2008. "Cognitive Abilities and Behavioral Biases," Sonderforschungsbereich 504 Publications 08-05, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
    Other versions:
  3. Dohmen Thomas & Falk Armin & Huffman David & Felix Marklein & Sunde Uwe, 2009. "The Non-Use of Bayes Rule: Representative Evidence on Bounded Rationality," Research Memoranda 002, Maastricht : ROA, Research Centre for Education and the Labour Market. [Downloadable!]
  4. Galarza, Francisco, 2009. "Choices under Risk in Rural Peru," MPRA Paper 17708, University Library of Munich, Germany. [Downloadable!]
  5. Maarten van Rooij & Annamaria Lusardi & Rob Alessie, 2007. "Financial Literacy and Stock Market Participation," Working Papers 07-23, Utrecht School of Economics. [Downloadable!]
    Other versions:
  6. Bauer, Michal & Chytilová, Julie, 2009. "The Impact of Education on the Subjective Discount Rate in Ugandan Villages," IZA Discussion Papers 4057, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Block, Joern & Sandner, Philipp & Spiegel, Frank, 2009. "Do risk attitudes differ within the group of entrepreneurs?," MPRA Paper 17587, University Library of Munich, Germany. [Downloadable!]
  8. Flavio Cunha & James J. Heckman, 2009. "The Economics and Psychology of Inequality and Human Development," NBER Working Papers 14695, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Matthew Rabin & Georg Weizsäcker, 2007. "Narrow Bracketing and Dominated Choices," IZA Discussion Papers 3040, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Burnham, Terence C. & Cesarini, David & Wallace, Björn & Johannesson, Magnus & Lichtenstein, Paul, 2007. "Billiards and Brains: Cognitive Ability and Behavior in a p-Beauty Contest," Working Paper Series in Economics and Finance 684, Stockholm School of Economics. [Downloadable!]
  11. Sarah Jacobson & Ragan Petrie, 2009. "Learning from mistakes: What do inconsistent choices over risk tell us?," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 143-158, April. [Downloadable!] (restricted)
  12. George M. Korniotis & Alok Kumar, 2008. "Do behavioral biases adversely affect the macro-economy?," Finance and Economics Discussion Series 2008-49, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Statistics
Access and download statistics

Did you know? About 1000 journals are listed on RePEc.

This page was last updated on 2009-11-3.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.