Reduces Risk Aversion Research Articles

The quiet revolution: Send-down movement and female empowerment in China

What promotes female empowerment and gender equality? We investigate how internal population mobility and social interaction foster the advancement of female empowerment and gender equality across diverse subpopulations. Using the urban-to-rural youth resettlement program in China during the 1970s — the Send-down Movement — as our empirical context, we find that rural females with greater exposure to urban youths have achieved higher levels of education, increased labor force participation, greater financial independence, enhanced autonomy in marital and fertility decisions, increased political engagement, heightened self-confidence, reduced risk aversion, and a stronger belief in gender-equal ideologies and social values. Our findings underscore the role of population mobility in disseminating gender-equal ideologies and practices, both through human capital formation and social interactions, leading to lasting impacts on female empowerment in traditional societies.

Education, Risk-attitude and Agricultural Innovation: Farm Level Investigation in North India

This paper explores the role of farmers’ education in promoting farming innovation, that is, contract farming (CF). Applying the Tobit model on cross-sectional data of 754 wheat growers in Haryana, it has been found that education directly and indirectly (by reducing risk aversion) stimulates the participation intensity of farmers in CF. It directly enhances farmers’ capacity to absorb and comprehend CF complexities and indirectly reduces farmers’ risk-aversion attitude. It fosters a positive attitude and willingness to adopt modern technologies. Hence, both the education and risk-taking attitudes of farmers are found to be significant for CF adoption probability and intensity. Other factors like farm size, non-farm income, asset ownership and access to credit, media and contact with extension services are all positive stimuli of CF participation intensity. The study suggests promoting field school and awareness programmes to help farmers both acquire and disseminate information on modern farm practices and technologies. JEL Codes: C01, I25, Q16

The measurement of fraud perception of investors and the mediating effect of risk aversion: the case of crypto assets

Purpose This study aims to gain a new perspective on auditing by measuring investors’ fraud perception and to reveal the necessity of increasing individuals’ fraud perception by determining the effect of fraud perception on the intention to invest in crypto assets from the investor’s perspective. Design/methodology/approach As part of this quantitative research, a survey was conducted on individuals residing in Türkiye and aged 18 years and above through a convenience sampling method. A total of 446 participants were included in the study. The data collected was analyzed using the partial least squares-variance based structural equation modeling (PLS-SEM) method using the SmartPLS program. Findings Fraud perception causes individuals to be more risk-averse and reduces their intention to invest in crypto assets. At the same time, it has been observed that risk-averse individuals have lower intention to invest in crypto assets. According to the results of the mediating effect analysis, risk aversion behavior partially mediates between the fraud perception and the intention to invest in crypto assets. Among the emotions, only fear increases risk aversion behavior. Among the personality traits, extroversion and openness to experience personality traits reduce risk aversion behavior, whereas neuroticism personality traits increase the intention to invest in crypto assets. Originality/value In an environment where traditional auditing activities are insufficient, increasing investors’ perceptions of fraud can reduce fraud-related losses. In this context, to the best of the authors’ knowledge, the present study might be among the first to investigate the impact of individuals’ perceptions of fraud on their investment intentions in crypto assets.

Climate smart agriculture practices by crop farmers: Evidence from south east Nigeria

Climate change has severely impacted African countries, particularly Nigeria, affecting farmers' productivity due to adverse weather conditions. Climate Smart Agriculture (CSA) has emerged as a crucial approach to ensure sustainable agricultural growth and food security. This study aims to identify the sources of awareness, prevalent innovative agricultural practices, determinants of CSA adoption, and the intensity of CSA practices among crop farmers in Southeast Nigeria. A two-stage multi-random sampling technique was employed to collect data from 270 farmers across various locations in Southeast Nigeria through questionnaires. The analysis used descriptive statistics and Heckman's two-stage selection model to evaluate the sources of awareness, the extent of CSA practice, and factors influencing CSA adoption and its intensity. Results indicate that cooperative societies and extension workers are the primary sources of CSA awareness in the region. Key determinants of CSA adoption identified in the study include gender, household size, farming experience, education level, labor force size, income, extension exposure, credit access, risk orientation, and cooperative membership. The Heckman model revealed that cooperative membership significantly increases the probability of CSA adoption, while risk-averse farmers are less likely to adopt CSA practices. The study concludes that while CSA practices are recognized and adopted to some extent, their implementation is insufficient to comprehensively combat the effects of climate change. Enhanced efforts to promote and integrate CSA practices more widely are critically needed. To improve CSA adoption and effectiveness, it is recommended to provide increased support for cooperative societies and extension services, better access to credit, and targeted education and training programs for farmers. Additionally, policies should focus on reducing risk aversion among farmers by providing insurance schemes and other risk management tools.

Mind the Gap: Why Wealthy Voters Support Brexit

Abstract Wealth provides self-insurance against financial risk, reducing risk aversion. We apply this insurance mechanism to electoral behaviour, arguing that a voter who desires a change to the status quo and who is wealthy is more likely to vote for change than a voter who lacks the same self-insurance. We apply this argument to the case of Brexit in the UK, which has been widely characterized as a vote by the ‘economically left-behind’. Our results show that individuals who lacked wealth are less likely to support leaving the EU, explaining why so many Brexit voters were wealthy, in terms of their property wealth. We corroborate our theory using two panel surveys, accounting for unobserved individual-level heterogeneity, and by using a survey experiment. The findings have implications for the potential broader role of wealth-as-insurance in electoral behaviour and for understanding the Brexit case.

The Fed takes on corporate credit risk: An analysis of the efficacy of the SMCCF

This paper evaluates the efficacy of the Secondary Market Corporate Credit Facility, a program designed to stabilize the U.S. corporate bond market during the COVID-19 pandemic. The program announcements on March 23 and April 9, 2020, significantly reduced investment-grade credit spreads across the maturity spectrum – irrespective of the program’s maturity-eligibility criterion – and ultimately restored the normal upward-sloping term structure of credit spreads. The Federal Reserve’s actual purchases reduced credit spreads of eligible bonds 3 basis points more than those of ineligible bonds, a sizable effect given the modest volume of purchases. A calibrated variant of the preferred habit model shows that a “dash for cash” – a selloff of shorter-term lowest-risk investment-grade bonds – combined with a spike in the arbitrageurs’ risk aversion, can account for the inversion of the investment-grade credit curve during the height of turmoil in the market. Consistent with the empirical findings, the Fed’s announcements, by reducing risk aversion and alleviating market segmentation, helped restore the upward-sloping credit curve in the investment-grade segment of the market.

Does language shape the way we think? A review of the foreign language effect across domains

Purpose and research question: This review investigates the influence of the foreign language effect (FLE) on moral decision-making, risk aversion, and causality perception. Recent research indicates that bilinguals employ different decision-making strategies according to the language in use (first vs. second language). Methodology: Following the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) protocol, we conducted a comprehensive literature review. Our analysis focused on empirical studies, yielding 28 articles that met our inclusion criteria. Findings and conclusions: Our findings reveal that participants, when operating in a foreign language context, are more inclined to accept harm for improved outcomes, exhibit reduced risk aversion, and display moderated causal perceptions, particularly in emotionally charged contexts. The variability in study conclusions can be attributed to factors such as age, personality, language proficiency, and linguistic characteristics. Significance: Our results support previous findings in the FLE, highlight limitations, and provide suggestions for future research.

Do grassroots interventions relax behavioural constraints and improve adoption of nutrition‐sensitive food production systems?

AbstractIn most developing countries, agricultural policies and programs are designed to promote productivity growth with modern inputs and technologies, and the success of these policies is measured primarily along the dimensions of technology adoption, with limited reference to the ancillary impacts on behavioural outcomes that may be a prerequisite to adoption. We test whether grassroots programs can additionally relax behavioural constraints, potentially enhancing the adoption of diversified production systems. In Odisha, India, using a series of laboratory‐in‐field experiments and survey instruments to elicit farmers' preferences for risk, agency and aspirations for themselves and their children, we find that respondents in villages where grassroots interventions were promoted showed significantly lower levels of risk aversion and higher aspirations for themselves and their children, along with improvements in production and consumption diversity. However, we do not find a mediating role of reduced risk aversion in improving direct program outcomes. Our results show that grassroots approaches are effective in inducing a shift towards changing production systems, and relaxing behavioural constraints, that can be leveraged over time to strengthen impacts.

E-commerce participation, digital finance and farmers' income

PurposeIt is imperative to achieve sustainable growth in farmers' earnings to sustain poverty alleviation efforts and achieve rural revitalization goals. The authors investigated the nature of the non-linear relationship between farmers' e-commerce participation and income growth, analyzed the rationale behind this correlation and examined the moderating effect of digital finance on this relationship.Design/methodology/approachThe authors conducted an empirical investigation using rural household data from the China Household Finance Survey and the regional digital finance index compiled by Peking University. The authors employed a fixed-effect model and a moderating effect model to identify the non-linear influences of e-commerce participation on farmers' income and to analyze the positive synergies of digital finance. The authors used identification and estimation techniques to mitigate the endogeneity problem, specifically employing heteroscedasticity-based instruments.FindingsThere is an inverted U-shaped relationship between e-commerce participation and farmers' income. Digital finance reduces the declining trend in the marginal effects of e-commerce and increases marginal values. Furthermore, the synergistic effect can promote the quality and efficiency of business activities by easing credit constraints, reducing risk aversion and stimulating innovative activities, which in turn can lead to sustained revenue growth.Originality/valueFew studies have focused on the non-linear relationship between e-commerce and farmers' income. This implies that achieving sustained income growth using e-commerce alone is difficult. The synergy between e-commerce and digital finance is a feasible path for achieving this goal.

Deciphering the influence of the macroeconomic environment on economic preferences: A comprehensive analysis of the Global Preferences Survey

This study investigates the nuanced impact of macroeconomic conditions on various economic preferences, broadening the scope beyond conventional risk preference analysis. Utilizing the Global Preference Survey data with a sophisticated nonlinear regression model, we reveal that favorable macroeconomic conditions boost patience, yet simultaneously reduce risk aversion, altruism, willingness to penalize unfair actions, and trust levels. These significant shifts in economic preferences, driven by macroeconomic scenarios, carry substantial implications for financial markets, investment behaviors, and the broader macroeconomy, necessitating in-depth exploration in financial research and policy design.

Toward a computational understanding of how reminiscing about positive autobiographical memories influences decision-making under risk.

Recent computational psychiatric research has dissected decision-making under risk into different underlying cognitive computational constructs and identified disease-specific changes in these constructs. Studies are underway to investigate what kind of behavioral or psychological interventions can restore these cognitive, computational constructs. In our previous study, we showed that reminiscing about positive autobiographical memories reduced risk aversion and affected probability weighting in the opposite direction from that observed in psychiatric disorders. However, in that study, we compared positive versus neutral memory retrieval by using a within-subjects crossover posttest design. Therefore, the change of decision-making from baseline is unclear. Furthermore, we used a hypothetical decision-making task and did not include monetary incentives. We attempt to address these limitations and investigated how reminiscing about positive autobiographical memories influences decision-making under risk using a between-subjects pretest posttest comparison design with performance-contingent monetary incentives. In thirty-eight healthy, young adults, we found that reminiscing about positive memories reinforced the commonly observed inverted S-shaped nonlinear probability weighting (f = 0.345, medium to large in effect size). In contrast, reminiscing about positive memories did not affect risk aversion in general. Given that the change in probability weighting after reminiscing about positive memories is in the opposite direction from that observed in psychiatric disorders, our results indicate that positive autobiographical memory retrieval might be a useful behavioral intervention strategy for amending the altered decision-making under risk in psychiatric diseases.

Comparing risk elicitation in lotteries with visual or contextual aids

Eliciting risk preferences usually involves tasks that subjects may find complex, such as calculations of expected values and assessment of probabilities in multiple price lists (MPL). There is a serious concern that the decisions of the subjects may be driven by miscalculations or miscalibration of probabilities, rather than by their risk preferences. In this paper, we test whether introducing aids to the usual lottery choices would help to reduce the error rate and possibly change risk aversion elicitation. The experiment was run with subjects from a rural area in Honduras. We compare the risk elicitation results of a multiple price list and two different treatments, one with visual aids (graphical representation of probabilities) and the other with contextual aids (bills to represent rewards and a distribution of ten beans between the two rewards to represent a lottery). Our results indicate that risk attitudes elicitation was affected with contextual aids, reducing risk aversion. For the treatment with visual aids we observe no effect.

Overcoming Risk Aversion Regarding Energy Efficiency Practices through Mimetic Pressure and Financial Slack: Findings from the Moroccan Manufacturing Sector

The Moroccan manufacturing sector consumes 24% of the country’s total energy production. Morocco is dealing with energy challenges related to its growing energy consumption, which has made energy efficiency a national priority. In this study, we construct a model that includes mimetic pressure and financial slack as drivers to reduce the intensity of risk aversion regarding electrical energy efficiency practices within companies. Our research model was empirically examined using survey data gathered from 193 manufacturing companies located in four Moroccan regions. Results show that risk aversion is negatively related to energy efficiency practices. Both mimetic pressure and financial slack are positively related to energy efficiency practices. Both mimetic pressure and financial slack reduce risk aversion. Mimetic pressure dampens the negative relationship between risk aversion and energy efficiency practices, while financial slack does not dampen the negative relationship between risk aversion and energy efficiency practices. This study shows the importance of mimetic pressure in reducing risk aversion regarding energy efficiency practices. Therefore, policymakers should publicize in the media companies that have gained from the adoption of energy efficiency practices and establish an award system of best energy efficiency practices in each industry. This study is an extension of the previous literature since we found that financial slack decreases the level of risk aversion, but this does not always translate into energy efficiency practices, as the previous literature assumes.

The effect of positive autobiographical memory retrieval on decision-making under risk: A computational model-based analysis.

Psychiatric disorders such as depressive and anxiety disorders are associated with altered decision-making under risk. Recent advances in neuroeconomics and computational psychiatry have further discomposed risk-based decision-making into distinct cognitive computational constructs and showed that there may be disorder-specific alterations in these constructs. As a result, it has been suggested these cognitive computational constructs may serve as useful behavioral biomarkers for these disorders. However, to date, little is known about what psychological or behavioral interventions can help to reverse and manage the altered cognitive computational constructs underlying risk-based decision-making. In the present study, we set out to investigate whether recalling positive autobiographical memories may affect risk-based decision-making in healthy volunteers using a description-based task. Specifically, based on theories of behavioral economics, we dissected risk preference into two cognitive computational constructs, utility sensitivity and probability weighting. We found that compared to recalling neutral memories, retrieving positive autobiographical memories increased utility sensitivity (Cohen's d = 0.447), indicating reduced risk aversion. Meanwhile, we also tested the influence of memory retrieval on probability weighting, the effect, however, was unreliable and requires further in-depth investigation. Of clinical relevance, the change in risk aversion after recalling positive memories was in the opposite direction compared to those reported in psychiatric disorders. These results argue for the potential therapeutic effect of positive autobiographical memory retrieval for the amendment of altered risk-based decision-making in psychiatric disorders.

Internationalization of business angel investments: The role of investor experience

In this study, we examine business angels (BAs)’ appetite for investing abroad and the role played by investment and entrepreneurial experience. To investigate BAs’ propensity to internationalize their investments, we study cross-border deals and culturally distant investments. Using an international sample of US and European BA deals, we find that both individual investment and entrepreneurial experience foster the internationalization of BAs’ investments, consistent with the predictions based upon the local bias theory. When splitting experience into domestic and foreign, we find that the former increases while the latter decreases local bias. When we separate US and European BAs, we find that the experiential background of BAs does not matter in the same way in Europe and in the US: while the general results are confirmed in Europe, both investment and entrepreneurial experience have a reduced impact in the US. We interpret these results in light of the reduced risk aversion of US BAs that lowers transaction costs.

Using Eye-Tracking Techniques to Understand the Role of Attention on Choice and Reversals

A preference reversal (PR) refers to behavior that violates revealed preference or is simply incoherent – i.e., not explainable by a rational ordering. In a classical PR experiment, for instance, participants often exhibit greater risk aversion in a Choice-based revelation procedure than in an Evaluation-based one, i.e., choose the safer of two gambles but express a higher monetary valuation for the riskier. We conjecture that PRs are partly due to the interaction between attention and task mode, and explore three compatible explanations using eye-tracking techniques. Explanation 1 says that difficult tasks require more time to be performed without ‘mistakes’. Those who pay scarcely more attention to Evaluation than Choice, therefore, are more likely to act incoherently. Our data corroborate such a prediction. Explanation 2 assumes that the subjective value of (i) a bet or (ii) any of its attributes (prize and winning probability) depends on the attention paid to it. PRs occur when people allocate attention to different elements across tasks. In line with recent models of drift-diffusion, we find evidence consistent with point (i): a higher focus on the safer bet during Choice predicts PRs. In contrast, little evidence supports the idea (ii) that the share of fixations on probabilities versus prizes influences behavior or PRs. Explanation 3, finally, states that the nature of the tasks may affect the comparisons people make between the options, which are relevant for behavior. For instance, the cognitive difficulty of pricing a bet in Evaluation could distract attention from the relative risk across bets, thus reducing risk aversion. In our design, both bets are visible on the computer screen in both tasks, and subjects make substantially more transitions between bets in Choice. Yet this is observed among all participants, not only the reversers.

Comparing Risk Elicitation in Lotteries with Visual Or Contextual Framing Aids

Eliciting risk preferences usually involves tasks that subjects may find complex, such as calculations of expected values and assessment of probabilities in multiple price lists (MPL). There is a serious concern that the decisions of the subjects may be driven by miscalculations or miscalibration of probabilities, rather than by their risk preferences. In this paper, we test whether introducing aids to the usual lottery choiceswould help to reduce the error rate and possibly change risk aversion elicitation. The experiment was run with subjectsfrom a rural area in Honduras. We compare the risk elicitation results of a multiple price list and two different treatments, one with visual aids (graphical representation of probabilities) and the other with contextual framing aids (bills to represent rewards and a distribution of ten beans between the two rewards to represent a lottery). Our results indicate that risk attitudes elicitation was affected with contextual framing aids, reducing risk aversion. For the treatment with visual aids we observe no effect.

Business Entrepreneurship And Education

This study is a review of the literature regarding business entrepreneurship and education. The main aim is to study the social and educational factors affecting the creation of self-employment for young people as a contribution to the development of local entrepreneurship, reducing unemployment and leveraging economic development. Of the various social influencers, it was important to understand the role of the family, especially of the parents, in motivating and sustaining the creation of one's own job and in the actions of entrepreneurship. In the same sense, at the educational level, to perceive the consequences of access to new resources that expand and support knowledge and skills acquisition useful for creating one's own job and reducing risk aversion of business activities. Finally, to understand the role of endogenous factors such as intelligence and individual motivation in the pursuit of entrepreneurship activities and their relationship with social and educational influencers.

Regional migration, entrepreneurship and university alumni

ABSTRACT How does the migration of university graduates from rural to urban areas impact entrepreneurial performance? We propose that rural-to-urban migrants found larger firms than urban entrepreneurs because migrants are less risk averse, and the migration process further reduces risk aversion. Also, we propose that rural-to-urban migrants found larger firms than rural entrepreneurs because urban areas provide better entrepreneurial opportunities and resources to create larger firms. To test our hypotheses empirically, we conducted an alumni survey and analysed 283 entrepreneurs who were admitted from various locations in China to Tsinghua University in Beijing, and then went to rural areas or urban areas upon graduation. We find that alumni entrepreneurs who migrated from rural to urban areas are more likely to found firms in the top quantile of firm size. This study provides implications for designing regional policies that facilitate labour mobility from rural to urban areas.

Reduced risk aversion and impaired short-term memory in juvenile rats with malformation of cortical development

Malformation of cortical developments (MCDs) is currently an incurable disease and is associated with significant neuropsychological problems, such as intellectual disability, epilepsy, and anxiety disorders from a young age. Development of a suitable animal model and pathophysiological study is therefore necessary to better understand and treat MCDs from being an incurable disease. The Y-maze, open field, and fear conditioning studies were performed at postnatal days 40–44 to validate the behavioral phenotypes of the existing rat model of MCD with prenatal methylazoxymethanol exposure at their developmental period. The study results show that juvenile rats with MCD spent significantly less time inside the novel arms in Y-maze and less time in the peripheral zones of the open field. Additionally, the rats with MCDs showed attenuated freezing behavior to sound and light cues as well as to context after fear conditioning. This comprehensive behavioral analysis of rats with MCDs at the juvenile period indicate a lack of spatial memory, decreased anxiety, and learning disability in these rats, which is compatible with the human behavioral phenotype of MCDs and can be used as the behavioral biomarkers for future translational research.