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.
Original language | English |
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Pages (from-to) | 484 - 515 |
Number of pages | 32 |
Journal | The Journal of Human Resources |
Volume | 50 |
Issue number | 2 |
Publication status | Published - 2015 |