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A Puncher’s chance: Expected gain and risk taking in a market for superstars

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  • Roulleau-Pasdeloup, Jordan

Abstract

Do policies that decrease potential earnings at the top of the income distribution induce agents to alter their risk-taking behavior? To answer this question I collect data on Mixed Martial Arts pomotions. I exploit the fact that one promotion introduced such a policy, while its competitor did not. Using a standard Difference-in-Differences analysis, I find that fighters in the promotion that implemented the policy take significantly less risks after its inception. On top of being statistically significant, the effect is also economically significant: the decrease in frequency of risk-taking ranges from 10% to 26% in the treatment group.

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  • Roulleau-Pasdeloup, Jordan, 2020. "A Puncher’s chance: Expected gain and risk taking in a market for superstars," Labour Economics, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:labeco:v:66:y:2020:i:c:s0927537120300944
    DOI: 10.1016/j.labeco.2020.101890
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H00 - Public Economics - - General - - - General

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