Risk-taking behavior in the wake of natural disasters

Lisa Ann Cameron, Manisha Shah

Research output: Contribution to journalArticleResearchpeer-review

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 languageEnglish
Pages (from-to)484 - 515
Number of pages32
JournalJournal of Human Resources
Volume50
Issue number2
Publication statusPublished - 2015

Cite this

Cameron, L. A., & Shah, M. (2015). Risk-taking behavior in the wake of natural disasters. Journal of Human Resources, 50(2), 484 - 515.
Cameron, Lisa Ann ; Shah, Manisha. / Risk-taking behavior in the wake of natural disasters. In: Journal of Human Resources. 2015 ; Vol. 50, No. 2. pp. 484 - 515.
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Cameron, LA & Shah, M 2015, 'Risk-taking behavior in the wake of natural disasters' Journal of Human Resources, vol. 50, no. 2, pp. 484 - 515.

Risk-taking behavior in the wake of natural disasters. / Cameron, Lisa Ann; Shah, Manisha.

In: Journal of Human Resources, Vol. 50, No. 2, 2015, p. 484 - 515.

Research output: Contribution to journalArticleResearchpeer-review

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AB - 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.

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