Abstract
Using answers to hypothetical income lotteries from respondents to a large Norwegian survey, we estimate an ordered probit model to estimate the effects of socioeconomic characteristics on attitudes towards income risk. Next, we impute a risk aversion measure to every respondent and use this to explain the observed variation in risky behavior. Under the assumption of constant relative risk-aversion preferences, the sample average for the coefficient of relative risk aversion is 4.6 with a standard deviation of 3.2, reflecting strong heterogeneity of risk preferences. We find that the imputed risk aversion measure has a significant effect on life style, labour market, and financial choices.
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