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Childhood determinants of risk aversion: The long shadow of compulsory education

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  • Dmytro Hryshko
  • María José Luengo‐Prado
  • Bent E. Sørensen

Abstract

We study the determinants of individual attitudes towards risk and,in particular,why some individuals exhibit extremely high risk aversion. Using data from the Panel Study of Income Dynamics we find that policy induced increases in high school graduation rates lead to significantly fewer individuals being highly risk averse in the next generation. Other significant determinants of risk aversion are age, sex, and parents' risk aversion. We verify that risk aversion matters for economic behavior in that it predicts individuals' volatility of income.
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  • Dmytro Hryshko & María José Luengo‐Prado & Bent E. Sørensen, 2011. "Childhood determinants of risk aversion: The long shadow of compulsory education," Quantitative Economics, Econometric Society, vol. 2(1), pages 37-72, March.
    • Handle: RePEc:ecm:quante:v:2:y:2011:i:1:p:37-72
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I29 - Health, Education, and Welfare - - Education - - - Other

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