Navigating Uncertainty: Do Communicable Diseases Influence Risk Preferences?

Abstract

This paper explores the effect of COVID-19 infection rates on individuals’ risk preferences using the Socio-Economic Panel (SOEP). Findings show that the spread of COVID-19 does not significantly alter risk preferences. While we do find that individuals with prior cardiovascular diseases reduce their preference for risk-taking, this zero effect is remarkably stable across subgroups of the population. We further identify financial worries, satisfaction with family life, and emotions as mediators of the effect of COVID-19 infection rates on individuals’ risk preferences.