When winter is over, its cold remains: Early-life famine experience breeds risk aversion

Xiangpo Chen, Xinyan Hu and Jinhai Xu

Economic Modelling, 2023, vol. 123, issue C

Abstract: Risk preferences are a fundamental element of economic decision-making, and major trauma influences individuals' feelings and attitudes towards risk. This study examines the long-term effects of the 1959–1961 Great Chinese Famine on risk aversion, combining (i) a field survey covering 2400 families in 2016 and (ii) demographic statistics from precisely documented official records covering six counties over the 1956–1964 period. We find that early-life famine exposure during childhood and adolescence significantly attenuated individuals' risk preferences in adulthood. Further evidence on spillovers in risk preferences through intergenerational transmission and interpersonal interaction channels explains the persistence of famine-related risk aversion. Moreover, China's kinship system and market exposure help to mitigate the negative impact of the famine.

Keywords: Early-life trauma; Famine; Risk preferences; Childhood and adolescence (search for similar items in EconPapers)
JEL-codes: D81 D91 N55 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:123:y:2023:i:c:s0264999323001013

DOI: 10.1016/j.econmod.2023.106289

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