Risk aversion: an experiment with self-employed workers and salaried workers

Abstract

In this article we present the results of a lottery-choice experiment to address the following questions: Do risk vary across individuals? What is the impact of context on risk aversion? The originality of this research lies in introducing variability in socio-demographic characteristics by recruiting not only students but also ‘real people’ among salaried workers and self-employed workers. Our results indicate that risk attitude strongly varies across individuals. In particular, individuals who are self employed tend to be significantly less risk averse than others. In addition, we replicated Holt and Laury (2002 Holt, C. A. and Laury, S. K. 2002. Risk aversion and incentive effects. American Economic Review, 92: 1644–55. [Crossref], [Web of Science ®] , [Google Scholar], 2005 Harrison, G. W. and List, J. A. 2004. “Field experiments”. In Journal of Economic Literature Vol. 42, 1013–59. [Google Scholar]) and Harrison et al. (2005 Harrison, G. W., Johnson, E., McInnes, M. M. and Rutström, E. E. 2005. Risk aversion and incentive effects: comment. American Economic Review, 95: 897–901. [Crossref], [Web of Science ®] , [Google Scholar])’s findings that individuals tend to be more risk averse with higher payoffs. Finally, our results concerning a potential experience effect indicate the existence of a significant order effect for both treatments.