People who have been living for a long time in areas where they are threaten by natural hazards are likely to have adapted in various ways to their hazardous environment. In this study, we investigate whether risk and time preferences of individuals exposed to a particular background risk (lahars hazard) differ with respect to the preferences of individuals that are not exposed to such risk. Our results show that poor are more risk seeking and more impatient in exposed areas than in unexposed area. However, for higher income categories, risk and time preferences seem to be unaffected by the exposure to lahars risk. We also show, in line with previous findings, that risk and time preferences are negatively correlated in individuals: more risk-averse individuals are also less patient.
Does the exposure to natural hazards affect risk and time preferences? Some insights from a field experiment in Perú
14 January 2014