Ruhr Economic Papers
Ruhr Economic Papers #581
Health Shocks and Risk Aversion
RGS, RWI, UDE, 10/2015, 36 S./p., 8 Euro, ISBN 978-3-86788-673-4 DOI: 10.4419/86788673download
Risk preferences are typically assumed to be constant for an individual across the life cycle. In this paper we empirically assess if they are time varying. Specifically, we analyse whether health shocks influence individual risk aversion. We follow an innovative approach and use grip strength data to obtain an objective health shock indicator. In order to account for the non-random nature of our data we employ
regression-adjusted matching. Health shocks are found to increase individual risk aversion. The finding is robust to a series of sensitivity analyses.
JEL-Classification: C81, D01, D81, I10
Keywords: Risk preferences; health shocks; hand grip strength; regression-adjusted matching