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The long-run impact of a traumatic experience on risk aversion

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  • Kim, Young-Il
  • Lee, Jungmin

Abstract

We examine the long-run impact of exposure to a traumatic event on risk attitudes. We estimate risk aversion of those who experienced the Korean War at different ages to identify a sensitive period for risk attitude formation. This major war broke out suddenly, and the impact of the war on civilians was substantial but limited to a brief period of time. The results reveal that individuals who were 4–8 years old during the peak of the war are more risk averse about five decades later. Furthermore, within the affected cohorts, those who resided in more severely damaged provinces are more risk averse.

Suggested Citation

  • Kim, Young-Il & Lee, Jungmin, 2014. "The long-run impact of a traumatic experience on risk aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 174-186.
    • Handle: RePEc:eee:jeborg:v:108:y:2014:i:c:p:174-186
    DOI: 10.1016/j.jebo.2014.09.009
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    More about this item

    Keywords

    Risk aversion; Civil war; Childhood experience; Korean War; Sensitive period;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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