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Risk and time preferences under the lockdown

There exist increasing evidence that human preferences—including risk and time attitudes—change across contexts (Bowles, 1998; Barseghyan et al., 2011; Wolbert and Riedl, 2013; Wang et al., 2016). Since measuring preferences consistently over time is challenging, most studies explore how risk and time preferences adapt after an exposure to exogenous shocks, mostly natural disasters or conflicts. As for risk attitudes, a number of papers report that negative shocks may increase risk lovingness (Eckel et al., 2009, Voors et al., 2012, Page et al. 2014, Hanaoka et al. 2018). However, other studies find the reverse: more risk aversion (Cameron & Shah, 2015, Cassar et al., 2017, Brown et al., 2018). The literature linking exposure to disasters and time preferences is less extensive but more consistent. Exposure to disaster make subjects more impatient (Voors et al., 2012, Cassar et al., 2017, Shupp et al., 2017). This evidence notwithstanding, we are aware of no evidence of whether and to what extent risk and time preferences adapt gradually, during a shock or a disaster. Covid-19 pandemic provides a unique opportunity. It is an adversarial event, with a large socio-economic impact on human lives and with a clear connection to mortality risk (especially for people above 50). This paper explores the stability of risk and temporal preferences during six days of the first two weeks of the lock down in Spain. We conduct an online experiment, eliciting a battery of incentivized and hypothetical measures, including (incentivized) risk aversion using a MPL (Holt & Laury 2002, 2005) and loss aversion (Gaetcher et al., 2007), and two hypothetical measures of short and long run time preferences (MPL, Coller and Willians, 1999). Given the time span of our data and different impact on risk aversion across studies, we refrain from hypothesizing whether we can observe any behavioral (and the direction) change in our data. Regarding time preferences, the question is whether the six days under study are sufficient to trigger any change in human time attitudes. However, given the consistent direction of the effect in the literature, we hypothesize that, if we detect any change, then the effect would be toward more impatience.

Lead investigator:

Pablo Branas-Garza


University of Loyola Andalucia

Primary topic:

Attitudes, media & governance

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