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23. März 2011

SOEP Brown Bag Seminar

SOEP Brown Bag Seminar: On the Stability of Self-Reported Measures of Willingness to Take Risks
On the Stability of Self-Reported Measures of Willingness to Take Risks

Termin

23. März 2011
12:30 - 13:30

Ort

Gustav-Schmoller-Raum
DIW Berlin im Quartier 110
Room 3.3.002A
Mohrenstraße 58
10117 Berlin

Ingo Isphording (Ruhr University Bochum Research School)

Newly available self-reported measures of willingness to take risks are increasingly used as empirical representations of individual risk preferences. Psychological literature states that risk preferences are formed during childhood and are stable thereafter.  Referencing this literature, stability of preferences is often used as an identication assumption in econometric work.  This study supports this assumption empirically. Using data from the German SOEP, a Hausman-Taylor approach is used to test the influence of childhood characteristics and exogenous lifetime events
on the level of self-reported willingness to take risks. Childhood characteristics turn out to be important determinants of willingness to take risks. Reported willingness to take risks decreases strongly with age, shocks like inheritance or emerging work disability have only a small, but signicant impact. This induces a potential source of endogeneity when willingness to take risks is used as explanatory variable in labor market research.

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