Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey

TLDR

The study provides new evidence on the distribution of risk attitudes in Germany using a novel survey instrument and a representative sample of about 22,000 individuals. The authors employ a large representative survey with novel risk‑attitude questions, a complementary field experiment with 450 participants, a standard lottery question to estimate relative risk aversion, and a set of domain‑specific risk questions, then compare the predictive power of these measures against observed risky behaviors. The results reveal substantial heterogeneity in risk attitudes, with older age and female gender associated with lower risk tolerance and height and parental education linked to higher tolerance; the novel survey measure predicts real‑world risk behaviors better than standard lottery questions, and context‑specific risk questions provide the strongest predictions for particular behaviors, challenging the dominance of lottery‑based risk assessments.

Abstract

This paper presents new evidence on the distribution of risk attitudes in the population, using a novel set of survey questions and a representative sample of roughly 22,000 individuals living in Germany. Using a question that asks about willingness to take risks on an 11-point scale, we find evidence of heterogeneity across individuals, and show that willingness to take risks is negatively related to age and being female, and positively related to height and parental education. We test the behavioral relevance of this survey measure by conducting a complementary field experiment, based on a representative sample of 450 subjects, and find that the measure is a good predictor of actual risk-taking behavior. We then use a more standard lottery question to measure risk preference, and find similar results regarding heterogeneity and determinants of risk preferences. The lottery question makes it possible to estimate the coefficient of relative risk aversion for each individual in the sample. Using five questions about willingness to take risks in specific domains - car driving, financial matters, sports and leisure, career, and health - the paper also studies the impact of context on risk attitudes, finding a strong but imperfect correlation across contexts. Using data on a collection of risky behaviors from different contexts, including traffic offenses, portfolio choice, smoking, occupational choice, participation in sports, and migration, the paper compares the predictive power of all of the risk measures. Strikingly, the general risk question predicts all behaviors whereas the standard lottery measure does not. The best overall predictor for any specific behavior is typically the corresponding context-specific measure. These findings call into the question the current preoccupation with lottery measures of risk preference, and point to variation in risk perceptions as an understudied determinant of risky behavior.