The Impact of Violence on Individual Risk Preferences

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.

Bibliographic Details

Main Authors:	Jakiela, Pamela, Ozier, Owen
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2015-10
Subjects:	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,
Online Access:	http://documents.worldbank.org/curated/en/2015/10/25155020/impact-violence-individual-risk-preferences-evidence-natural-experiment https://hdl.handle.net/10986/22862
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