Changes in Risk Attitudes Vary Across Domains Throughout the Life Course
61 Pages Posted: 12 Aug 2022 Last revised: 1 May 2023
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Changes in Risk Attitudes Vary Across Domains Throughout the Life Course
Changes in Risk Attitudes Vary Across Domains Throughout the Life Course
Date Written: August 9, 2022
Abstract
Risk attitudes are important predictors of various economic decisions and socio-economic outcomes. Although studies show that peoples’ general willingness to take risks decreases with age, there are few reports on the age dependence of domain-specific risk attitudes. Drawing on the Socio-Economic Panel (SOEP), this study employs a proxy variable approach to disentangle age from periodic and cohort effects, while allowing the age effect to take a flexible functional form. Our analyses indicate that risk attitudes are domain-specific. Additionally, we show that age-profiles of general rather than domain-specific risk attitudes can lead to misleading results when they are used to predict life outcomes.
Keywords: risk attitudes, willingness to take risks, SOEP, life cycle, age-period-cohort
JEL Classification: D01, D8, J1
Suggested Citation: Suggested Citation