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