Risk aversion

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Preference towards risk are likely to affect individual decision-making, such as investment, purchase of health care and job change. People who care more about risk and are willing to do more to reduce their exposure to risk than others, are called "risk averse". In the field of development economics, risk preference plays an important role to understand economic development process because it influences individual behavior directly and thereby shapes various economic outcomes. "In the context of low income countries, an individual's risk aversion is often mentioned as a possible explanation for the lack of entrepreneurship or the technological innovation delays maintaining individuals in poverty and impeding growth and development.(Cardenas and Carpenter, 2008) " A villager who's willing to take risks when potential returns are high, will likely manage livelihood activities differently than a more risk averse neighbor.

Guidelines

• There are mainly 3 survey-based approaches to measure risk preference: self assessment, hypothetical lotteries, and income prospect choices.

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This article is part of the topic Questionnaire Design

Additional Resources

• Gender and Risk Aversion: https://wol.iza.org/articles/gender-differences-in-risk-attitudes