Temporal Stability of Risk Attitudes and the Impact of Adverse Shocks—A Panel Data Analysis from Thailand and Vietnam

Exogenous negative shocks and intrinsic risk attitudes are two important elements characterizing the vicious cycle of poverty associated with rural households in developing countries. Recent empirical studies suggest that adverse shocks—a key driver of poverty—can trigger substantial changes in the risk attitudes of poor people, leading to decisions that perpetuate their lives in poverty. Although the temporal variability of risk attitudes is a controversial topic, the literature advocating the temporal variability of risk attitudes suggests that covariate shocks, such as natural disasters, alter risk attitudes over time, whereas idiosyncratic shocks show no such significant impact.