Health Shocks and Risk Aversion
36 Pages Posted: 3 Dec 2015
There 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: Suggested Citation