Measuring risk aversion among the urban poor in Kolkata, India

We examine risk preferences in an urban setting in a low-income developing country with nonstudent subjects by adapting the experimental approach of Holt and Laury (HL; 2002). We conducted 22 group experiments with 404 participants and used in-kind payoffs. The average respondent was ‘riskaverse’ (the midpoint of Constant Relative Risk Aversion (CRRA) intervals among participants was 0.53, roughly in line with most similar studies in poor countries).

Like most other studies, we find weak correlations between risk aversion and most socio-economic characteristics. Importantly, a sizeable minority had difficulty understanding the experiment, and
participants were influenced by the context in which the experiments occurred (these problems are not unique to our study). Our article adds to a growing literature that suggests that risk aversion elicitation approaches are sensitive to context and cognitive abilities of participants.

First author and contact person: Joe Cook

EfD Authors

Professor Dale Whittington Research associate

Keywords

Files

Link to pdf 423.0 kB

Centers

eeu sweden

Type of publication

Peer reviewed

Reference

Cook, Joseph , Susmita Chatterjee, Dipika Sur, and Dale Whittington, 2013, Measuring risk aversion among the urban poor in Kolkata, India”, Applied Economics Letters, 2013, 20, 1–9

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