Risk-Taking Behavior in the Wake of Natural Disasters Article Swipe

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Lisa Cameron , Manisha Shah ·

YOU? · · 2015 · Open Access · · DOI: https://doi.org/10.3368/jhr.50.2.484 · OA: W1904113786

We investigate whether experiencing a natural disaster affects risk-taking behavior. We conduct standard risk games (using real money) with randomly selected individuals in rural Indonesia. We find that individuals who recently suffered a flood or earthquake exhibit more risk-aversion. Experiencing a natural disaster causes people to perceive that they now face a greater risk of a future disaster. We conclude that this change in perception of background risk causes people to take fewer risks. We provide evidence that experimental risk behavior is correlated with real-life risk behavior, highlighting the importance of our results.