Journal article
Risk-taking behavior in the wake of natural disasters
L Cameron, M Shah
Journal of Human Resources | UNIV WISCONSIN PRESS | Published : 2015
DOI: 10.3368/jhr.50.2.484
Abstract
We investigate whether experiencing a natural disaster affects risk- taking behavior. We conduct standard risk games (using real money) with randomly selected individuals in rural Indonesia. We fi nd that individuals who recently suffered a fl ood or earthquake exhibit more risk- aversion. Experiencing a natural disaster causes people to perceive that they now face a greater risk of a future disaster. We conclude that this change in perception of background risk causes people to take fewer risks. We provide evidence that experimental risk behavior is correlated with real- life risk behavior, highlighting the importance of our results.
Grants
Awarded by Australian Research Council
Funding Acknowledgements
Lisa Cameron is a professor in the Department of Econometrics and Business Statistics at Monash University in Australia. Manisha Shah is an associate professor in the Department of Public Policy at the University of California, Los Angeles and a Faculty Research Fellow at the NBER. The authors thank Abigail Barr, Marianne Bitler, Ethan Ligon, Simon Loertscher, Mark Rosenzweig, Laura Schechter, John Strauss, and Tom Wilkening for helpful comments. Lucie Tafara Moore provided excellent research assistance. They are also indebted to Bondan Sikoki and Wayan Suriastini for assistance in the design and implementation of the survey. The authors gratefully acknowledge funding from the Australian Research Council, #DP0987011.