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Are Risk Aversion and Impatience Related to Cognitive Ability?
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@MISC{Dohmen_arerisk,
author = {Thomas Dohmen and Armin Falk and David Huffman and Uwe Sunde},
title = {Are Risk Aversion and Impatience Related to Cognitive Ability? },
year = {}
}
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Abstract
This paper investigates whether risk aversion and impatience are correlated with cognitive ability. We conduct incentive compatible choice experiments measuring risk aversion, and impatience over an annual time horizon, for a representative sample of roughly 1,000 German adults. A measure of cognitive ability is provided by two submodules of one of the most widely used IQ tests. Interviews are conducted in subjects ’ own homes. We find that lower cognitive ability is associated with greater risk aversion, and more pronounced impatience. These relationships are statistically and economically significant, and robust to controlling for personal characteristics, educational attainment, income, and measures of liquidity constraints. We perform a series of additional robustness checks, which help rule out other possible confounds.
Keyphrases
risk aversion cognitive ability impatience related additional robustness check pronounced impatience annual time horizon iq test incentive compatible choice experiment personal characteristic educational attainment liquidity constraint representative sample subject home possible confounds german adult
