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The Impact of Violence on Individual Risk Preferences : Evidence from a Natural Experiment

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World Bank (WB)

Abstract: This study estimates the impact of Kenya’s post-election violence on individual risk preferences. Because the crisis interrupted a longitudinal survey of more than five thousand Kenyan youth, this timing creates plausibly exogenous variation in exposure to civil conflict by the time of the survey. The study measures individual risk preferences using hypothetical lottery choice questions, which are validated by showing that they predict migration and entrepreneurship in the cross-section. The results indicate that the post-election violence sharply increased individual risk aversion. Immediately after the crisis, the fraction of subjects who are classified as either risk neutral or risk loving dropped by roughly 26 percent. The findings remain robust to an IV estimation strategy that exploits random assignment of respondents to waves of surveying.
Type: Working Paper
Publications & Research :: Policy Research Working Paper
Publications & Research
Link: http://hdl.handle.net/10986/22862
Subject: EMPLOYMENT
RISKS
ECONOMIC GROWTH
STORM
PRODUCTION
UTILITY FUNCTIONS
ERRORS
INCOME
INTEREST
UTILITY MAXIMIZATION
STRATEGIES
INFORMATION
SERVICES
PUBLIC SERVICES
EFFECTS
INCENTIVES
EXPERIMENTAL DATA
CAPACITY BUILDING
INDIFFERENCE CURVES
VARIABLES
DAMAGES
ASSOCIATIONS
WEALTH
RISK AVERSE
PROBABILITIES
EVACUEES
TRENDS
RISK AVERSE INDIVIDUALS
BIASES
DEVELOPMENT
CHOICE
LABOR MARKET
DATA
DECISION THEORY
SAVINGS
EXPERIMENTAL ECONOMICS
DEVELOPMENT ECONOMICS
PROBABILITY
ECONOMIC DOWNTURNS
ECONOMETRICS
EXTERNALITIES
EXPECTED RETURN
UNEMPLOYED
MIGRATION
STANDARD ERRORS
NATURAL DISASTERS
UTILITY THEORY
MARKETS
FORECASTING
ORGANIZATIONS
DISASTERS
INDICATORS
LOTTERY
EXPECTED VALUES
NEGOTIATIONS
LABOR
FARMERS
LOTTERIES
UTILITY
FINANCE
EFFICIENCY
ECONOMIC RESEARCH
TECHNOLOGY
OPINION POLLS
HUMAN CAPITAL
RISK NEUTRAL
EARTHQUAKE
ACCOUNTABILITY
ECONOMIC COSTS
RISK LOVING
VALIDITY
VALUE
BANK
CREDIT
NEUTRALITY
UTILITY FUNCTION
VICTIMS
VICTIM
EXPECTED VALUE
INCENTIVE EFFECTS
PROPERTY
DECISION MAKING
MEASUREMENT
COUNTING
SURVEYS
ECONOMICS
INSTRUMENTAL VARIABLES
MANAGEMENT
GOVERNANCE
BUSINESS CYCLES
SOCIAL CAPITAL
SLUMS
TRADE
LAND
THEORY
WARS
WAR
HURRICANE
INVESTMENT
EXPECTED UTILITY
STATISTICS
RISK
LAW
CIVIL WAR
RIOTS
RANDOMIZATION
RISK AVERSION
ENTREPRENEURSHIP
LABOUR
COLLECTIVE ACTION
GOVERNMENTS
OUTCOMES
POLITICAL PARTICIPATION
DEVELOPMENT POLICY




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