Does higher income rank deter risk-taking behavior? The case of migration

Does higher income rank deter risk-taking behavior? The case of migration

Wednesday, 13 February 2019, 13:00-14:00

Room: Α2-2

Presenter: Katsaiti Marina-Selini, UAEU

In this paper we aim to empirically investigate the effect of relative deprivation on risk taking behaviour, with specific interest on migration decisions. We conjecture that the relative position of the individual in addition to the ranking of his/her country of residence can affect decisions that entail risk. Using the Gallup World Poll data for the period 2006-2018 we propose a risk tolerance index, based on migration (internal and international) and entrepreneurial activity information. We also investigate the relationship between relative deprivation and the individual constructs of the risk index in separate specifications. Using instrumental variable and pseudo panel methods, our preliminary findings reveal the following: concern over relative wealth makes people less risky in all regions, while absolute income has the opposite effect. Increase in World Bank ranking decreases individual risk taking behavior in Asia, the Americas and overall. Relative GDP has a positive effect on individual risk tolerance for Americas, ME and Africa and when all regions are pooled together while individual relative income has the opposite sign for Europe and the Middle East. These results are robust for the IV and the pseudo panel methods.

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