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Health Shocks and Risk Aversion

SOEPpaper No. 801

36 Pages Posted: 3 Dec 2015

See all articles by Simon Decker

Simon Decker

University of Duisburg-Essen

Hendrik Schmitz

University of Duisburg-Essen - Department of Economics and Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: September 16, 2015

Abstract

Risk preferences are typically assumed to be constant for an individual across the life cycle. In this paper we empirically assess if they are time varying. Specifically, we analyse whether health shocks influence individual risk aversion. We follow an innovative approach and use grip strength data to obtain an objective health shock indicator. In order to account for the non-random nature of our data we employ regression-adjusted matching. Health shocks are found to increase individual risk aversion. The finding is robust to a series of sensitivity analyses.

Keywords: Risk Preferences, Health Shocks, Hand Grip Strength, Regression-Adjusted Matching

JEL Classification: C81, D01, D81, I10, I12

Suggested Citation

Decker, Simon and Schmitz, Hendrik, Health Shocks and Risk Aversion (September 16, 2015). SOEPpaper No. 801, Available at SSRN: https://ssrn.com/abstract=2698618 or http://dx.doi.org/10.2139/ssrn.2698618

Simon Decker (Contact Author)

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Hendrik Schmitz

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

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