Risk Attitude in Couples

Abstract

The determinants of risk attitude in couples are explored using data from the German Socio-\nEconomic Panel over the period 2004 to 2009. The focus of the analysis is the repeated responses\nto the survey question about general willingness to take risk. Responses to this question are\nprovided on a 0-10 Likert scale. We focus on couples in the data set, and we apply the bivariate\npanel ordered probit model to the analysis of the simultaneous determination of the male's and\nthe female's risk attitude. A number of individual characteristics, including age, height, edu-\ncation and household income, are found to have strong e ects on risk attitude, in some cases\ndi ering markedly between the male and the female. Both the individual-speci c e ects and\nthe observation-speci c error terms are assumed to have non-zero correlations between the two\nequations. These correlations are estimated to be +0.27 and +0.28 respectively. We consider the\nformer to be a key parameter, since its positive sign may be interpreted as a form of homophily:\nindividuals tend to form partnerships with others having a similar risk attitude.

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